A VA Home loan offers benefits to veterans, active duty personnel and surviving spouses who qualify. A VA mortgage can be obtained through numerous housing programs offered by the Department of Veterans Affairs (VA). With this type of mortgage, the VA will either become your mortgage lender or the VA will guarantee a portion of your loan from a private lender in order to help you receive better loan terms.
To qualify for a VA home loan, you must meet the eligibility requirement set by the VA, including time of service requirements, income limits, credit score minimums and satisfactory debt to income ratios. You will also need to meet additional requirements that are specific to the type of mortgage program that you wish to enroll in. Before applying for a VA mortgage, it is worth it to learn more about VA loan programs, including the benefits of these programs, how to qualify and how you can apply.
What is a VA home loan?
A VA home loan is a loan available to qualifying applicants that is either guaranteed by the VA or where the VA is the lender. VA home loans can be used to:
- Purchase a home or a condominium in a VA-approved project.
- Build a home.
- Simultaneously purchase and improve a home.
- Improve a home by making energy-efficient improvements or by installing energy-related features.
- Purchase a manufactured home and/or lot.
- Refinance an existing VA-guaranteed or direct loan for the purpose of reducing interest rates.
- Refinance an existing mortgage loan on a residence owned and occupied by a veteran or active duty service member.
Once your VA mortgage eligibility has been verified, you will be able to contact approved lenders in your area. You are strongly encouraged to review multiple lenders in order to determine the best loan that you can afford, be pre-approved on and the lender that is willing to offer you the best rates.
Once approved for a VA home loan, you will have the opportunity to work with a real estate agent to help you navigate the home-buying process and find the right home for you.
What are the benefits of a VA loan?
VA mortgages offer numerous advantages to those who qualify, including, but not limited to:
- No down payment requirements, as long as the sales price does not exceed the appraised value.
- No private mortgage insurance premium requirements.
- VA rules will limit the amount that you can be charged by a lender for closing costs.
- Closing costs may be paid by the seller, in some cases.
- You cannot be charged a penalty fee by your lender if you pay off your loan early.
- Should you run into difficulties making payments, the VA may be able to provide you with some assistance.
A VA home loan often offers better terms than traditional mortgages due to the fact that the VA guarantees a portion of your mortgage. This entices lenders to offer better terms because it takes much of the risk away from the lender.
Who qualifies for a VA loan?
General VA loan eligibility requirements include:
- Service-length-related requirements.
- You must either be active-duty military personnel or a veteran who was discharged under conditions other than dishonorable.
- The home must be for your own personal occupancy.
You may still qualify for a VA mortgage if you do not meet service-length requirements if you were discharged for one of the following reasons:
- The convenience of the government.
- Reduction in force.
- Certain medical conditions.
- A service-connected disability.
You may be able to obtain a VA home loan as a surviving spouse of a veteran if any of the following apply to you:
- You are an un-remarried spouse of a veteran who died while in service or from a service-connect disability.
- You are a spouse of a service member missing in action or a prisoner of war.
- You are a surviving spouse in receipt of Dependency and Indemnity Compensation (DIC) benefits in cases where the veteran’s death was not service-connected.
Your credit history and credit score for a VA loan must satisfy the set minimums. The exact minimum credit score that you must have may vary by lender or by VA program. Additionally, you must meet VA loan income requirements that ensure that you will be able to make payments on your mortgage. For this purpose, your debt-to-income ratio will be reviewed when applying for any type of VA loan.
You must obtain a valid Certificate of Eligibility (COE) in order to obtain this type of loan. You can apply for a COE online, by mail or through your approved lender. In order to obtain a COE, you may be required to provide the VA with documentation that supports the information that you provide on your application.
VA Loan Applications
To apply for a VA home loan, you must apply for a COE. As stated previously, you may submit an application online, by mail or through an approved lender. Depending on your status, you may be asked to provide the VA with additional information or documentation. Veterans will need to provide a copy of their discharge or separation papers (DD214) while active duty service members must provide a statement of service, signed by a commanding or personnel officer.
You will also need to determine the type of loan you are interested in and the lender you would like to work with. For most loan types, the VA will back and guarantee a portion of your loan, but won’t serve as your mortgage lender. For the Native American Direct Loan, the VA will serve as your lender.
You can find VA home loan lenders in a number of ways, including by contacting your local VA office, locating lenders online or by contacting local lenders in your area and asking whether or not they offer VA loans. VA-approved lenders will also be able to help you apply for your COE, if you have not already done so previously.
The Types of VA Loans Available
When applying for a VA home loan, you may have several different types of loans that are available to you, depending on your qualifications. Therefore, it is important to review the various types of loans available through the Department of Veterans Affairs in order to select the loan program that is right for you.
About a Purchase Loan
A purchase loan will aid you in the purchase of a home at a competitive interest rate that is often lower than what traditional mortgages can offer. Around 90 percent of applicants will not be required to make a down payment or purchase mortgage insurance in order to obtain this type of VA-backed loan.
About an Interest Rate Reduction Refinance Loan (IRRRL)
With VA Interest Rate Reduction Refinance Loans (IRRRL), you may be able to obtain a lower interest rate when refinancing an existing VA loan. Additionally, you have the option of refinancing a VA adjustable rate mortgage (ARM) into a fixed rate mortgage, which can potentially save you even more over the life of your loan. An ARM can be a type of purchase loan that has a fixed interest rate for a set duration, like three or five years, and then changes periodically to reflect the average credit market rate.
About a VA Cash-Out Refinance
Cash-Out Refinance loans may be an option if you are interested in cashing out your home’s equity to pay other debts, pay for school tuition or make improvements on your home. This type of loan program can also be utilized to refinance a non-VA loan into a VA loan.
About a Native American Direct Loan (NADL)
The NADL program aids Native American Veterans in the purchase, construction, improvement or refinancing of a home on Native American trust lands. In order to qualify for this type of loan, your tribal organization must participate in the VA direct loan program.
You will not find VA loan limits in the various types of VA-backed loans that you may qualify for. The Department of Veterans Affairs does not set a cap on how much you can borrow. Rather than having a VA loan max, the VA will guarantee a maximum of 25 percent of the VA county loan limit for loans that are over $144,000.
Learn About VA Housing Grants
In addition to the various types of VA mortgages, it is also worth knowing that there are several housing grants available to veterans who have certain permanent and total service-connected disabilities. These grant programs include:
- Specially Adapted Housing (SAH) Grant
- Special Housing Adaptation (SHA) Grant
- Temporary Residence Adaptation (TRA) Grant
You must meet additional eligibility requirements, primary related to your service-connected disability, in order to qualify for one of these VA grants.