How to Get a VA Loan

If you’re a veteran or are currently serving in the military, you’re likely acquainted with the expression, “Thank you for your service.” But there’s another way you can be thanked: with a VA home loan. A VA loan, a benefit for those who have served the U.S. and their families, can be a great way to buy a house without needing to make a down payment. In this article, we’ll walk you through the steps so you can learn how to get a VA loan.

Step 1: Find out if you’re eligible for a VA loan

A VA home loan is a federal government loan program backed by the Veterans Affairs (VA) Department. VA loans are available to veterans, active duty members of the military or their surviving spouses who meet program requirements. Because the VA backs the home loan, lenders are able to approve mortgages to qualified borrowers without a down payment.

Your VA loan eligibility is tied to your service to the U.S. military with specific minimum requirements to qualify. Each day of service in the military counts towards your VA entitlement, which is the guarantee the VA provides to your lender.

Who is eligible to get a VA loan?

Before you can find out if you qualify for a specific loan amount to buy a house, you’ll need to determine whether you meet the requirements to be eligible for a VA loan include:

• Active duty service members have served for 90 continuous days
• For veterans, the minimum amount of service required varies according to whether the period when you served was during a war or in peacetime
• For those with a service-related disability, less than 90 or 181 days of service depending on the time period
• For surviving spouses, a spouse who is missing in action, died while in service or died because of a service-related injury
• Provide a certificate of eligibility

Where can I get my COE?

You can request a certificate of eligibility (COE) online at the VA Department or ask your lender to request one for you. You’ll need to provide some information that varies depending on your service status or whether you are a surviving spouse.

Step 2: Learn the VA loan requirements

VA loan requirements are different and may be more lenient than the requirements for conventional loans and for other government-backed loans such as FHA loans and USDA loans.

Unlike other loan programs, VA loan limits don’t apply to every borrower. However, the amount you can borrow may be limited if you don’t have a full VA loan entitlement. For example, if you have another VA loan or if you paid one off but the entitlement hasn’t been restored yet, you may have a partial entitlement.

VA loan requirements

Once you’ve established that you’re eligible for a VA loan, you can review the VA loan requirements, which include:

→  No defaults on any federal debt
→  Two years of employment history
→  Maximum debt-to-income (DTI) ratio of 41%
→  Minimum residual income, which is cash left over after you pay your bills each month and varies according to where you live and your family size
→  VA home appraisal
→  VA funding fee of 0.5% to 3.6% of the loan amount
→  The home you buy must be your primary residence

VA loan benefits

The VA home loan program has several advantages for those who are eligible for this benefit:

• No down payment
• No loan limit
• No minimum credit score
• No mortgage insurance
• Lower closing costs

 Read more about getting a VA loan with bad credit.

Step 3: Shop for a VA-approved lender

To get the best VA loan rates on your mortgage, shop around among several lenders and compare. According to a LendingTree study, borrowers who shopped around saved over $60,000 on average over the lifetime of their loans.

How do I choose a VA mortgage lender?

Not every lender offers VA loans and some who do only handle a few VA loans each year. It’s wise to work with a VA lender who is knowledgeable about VA backed home loans and can help you take maximum advantage of your VA loan benefit. To compare lenders, you may want to look for information such as their minimum credit score, whether they publish their VA loan rates online, how easy their site is to navigate and the availability of multiple VA loan programs such as a purchase loan, a VA streamlined refinance and a cash-out refinance.

 Get started by comparing our picks for the best VA loan lenders.

Step 4: Gather your financial documents

As with any home loan, you’ll need to submit some standard financial documents, along with some items specific to the VA home loan program.

Step 5: Find a home and close your loan

Once your offer is accepted by the seller and your mortgage approval is finalized, the final step is to close on your home. The closing process on a VA home loan is similar to any other mortgage closing for a purchase or a refinance and includes:

• Obtain proof of your homeowners insurance policy.
• Review your Closing Disclosure, which will be provided three days before your closing.
• Do a final walkthrough of your home before the closing with your real estate agent.
• Confirm with your lender how much money you will need to provide at the closing and how to transfer it.
• Confirm the closing location, which could be at a title company, an attorney’s office or an escrow company.
• Bring a cashier’s check or wire information to the closing for your funds and a government-issued ID.
• Review and sign all required documents at the closing.

Unlike other loan programs, a VA appraisal is always mandatory for a VA mortgage.

What is a VA amendatory clause?

One difference between a VA home loan and other loan programs is that the buyers and the sellers must sign a VA amendatory clause before the appraisal is completed. This is a standard escape clause which would be invoked if a VA appraisal comes in lower than the sale price. If that happens, the amendatory clause allows the buyer to negotiate for a lower price, cancel the transaction and have their deposit returned, or proceed with the purchase by making a down payment that covers the gap between the appraised value and the sales price.

What are the closing costs for a VA home loan?

Closing costs for a VA home loan are similar to any other mortgage and range from 2% to 6% of the loan amount. However, lender fees for VA loans — which are one part of closing costs — are capped at 1% of the loan amount.

VA home loans also require a funding fee of 0.5% to 3.6% of the loan amount. The percentage varies based on how much down payment you make, if any, and whether you’re purchasing or refinancing the home.

Closing costs for a VA loan include:
→  VA funding fee
→  Origination fee charged by your lender
→  Mortgage points for a lower rate
→  Credit report fees and the balance of any credit card or judgment to pay off to quality
→  VA appraisal fee
→  Homeowners insurance
→  State and local property taxes
→  Title insurance
→  Recording fees