If you’re a military veteran, active-duty service member, or surviving spouse of a veteran, the benefits of a VA mortgage can help you reach your dream of buying a home. Compared to conventional and FHA mortgages, the benefits of VA loans can be very competitive for those who qualify.
In this guide, we’ll walk you through everything you need to know about qualifying for a VA mortgage, including eligibility requirements, loan benefits, and the application process.
VA Loan Eligibility Requirements
VA mortgages are designed for veterans, active-duty service members, certain members of the National Guard and Reserves, and surviving spouses of veterans.
Service members must have served at least 90 continuous days to meet the minimum active-duty service requirement.
If you’re a veteran, National Guard member, or Reserve member, the minimum active-duty service requirement depends on when you served.
If you do not meet the minimum active-duty service requirement, you may still qualify depending on the reason you were discharged. Some reasons for discharge that can still help you qualify for a VA mortgage include hardship, the convenience of the government, early out, reduction in force, a medical condition, or a service-connected disability.
You may also qualify for a VA mortgage in certain situations if you are the surviving spouse of a veteran.
To check your eligibility based on when you served or other circumstances, consult the eligibility information page of the U.S. Department of Veterans Affairs website.
Obtain Your Certificate of Eligibility (COE)
To get a VA mortgage, you’ll first need to confirm your eligibility by obtaining a Certificate of Eligibility (COE).
To receive a COE you can apply online through the Department of Veterans Affairs website, apply through your lender, or apply by mail.
Overview of VA Loan Benefits
VA loans come with advantages that make them attractive to eligible borrowers. Generally, VA loans don’t require a down payment, private mortgage insurance (PMI), or the same credit scores as other loans. They also offer competitive interest rates and fees, as well as assumable mortgage options.
No Down Payment Requirement
One of the standout features of a VA mortgage is that no down payment is required. This can be a game-changer for veterans and service members who might not have enough savings for the down payment of a conventional or FHA loan.
Credit Score Requirements
The VA doesn’t set a minimum credit score. However, lenders might set their own credit score requirements. Borrowers with low credit scores may be able to qualify based on other factors, such as employment history or income.
Refinancing with a VA Loan
VA loans also offer excellent refinancing options. The first is an Interest Rate Reduction Refinance Loan (IRRRL), also known as a VA Streamline Refinance. This option allows you to refinance your existing VA loan to a lower interest rate with minimal documentation and no appraisal required.
Another popular option is a Cash-Out Refinance. This option allows you to take out cash from your home’s equity. It’s available to both existing VA loan holders and those refinancing from a conventional or FHA loan to a VA loan.
Benefits of Refinancing with a VA Loan
Refinancing your VA loan can provide several benefits. One of the most popular benefits is lower monthly payments because of the lower interest rates. Refinancing VA loans can also give homeowners access to home equity for major expenses like home improvements, education, or debt consolidation.
The IRRRL program offers a simplified refinance process with fewer documentation requirements, making it quicker and easier than other refinancing options. This can help you get the refinancing done as efficiently as possible.
VA Loan Closing Costs
While VA loans have several cost-saving benefits, there are still some closing costs to be aware of. You will likely have to pay a few one-time fees, such as the VA funding fee, appraisal fee, recording fees, and title insurance.
Common VA Loan Closing Costs
Here are some closing costs associated with VA loans:
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Origination Fee: Charged by the lender for processing the loan.
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Credit Report Fee: Covers the cost of pulling your credit report.
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Prepaid Taxes and Insurance: Upfront payment for property taxes and homeowners insurance.
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Discount Points: Optional fees paid to reduce the interest rate on your loan.
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Title Search Fee: Ensures there are no legal claims against the property.
Choosing a VA-Approved Lender
When starting your search for a VA-approved lender, you may want to consult the resources on the VA website or speak with other veterans or service members who have purchased homes with VA loans.
When selecting a lender, it’s a good idea to look for someone who has a proven track record in handling VA loans. If they’re experienced, they likely have a reputation for it, which you can see by reading reviews and testimonials from other veterans.
There are also some general skills you’ll want to look for in a lender. It’s usually ideal to work with someone who has excellent communication skills, a competitive interest rate to offer, and low fees.
VA Loan Application Process
Here are the steps involved in buying a home with a VA loan:
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Obtain Your COE: Start by getting your Certificate of Eligibility. This can be done online, through your lender, or by mail.
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Pre-Approval: Get pre-approved by a VA-approved lender to understand how much you can borrow and to make your home search more effective.
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Find a Home: Work with a real estate agent familiar with VA loans to find your home.
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Make an Offer: Submit a purchase offer on the home. Ensure it includes a VA loan contingency clause.
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VA Appraisal and Underwriting: The lender will order a VA appraisal and underwrite your loan.
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Close the Loan: Once approved, you’ll attend the closing to sign the final paperwork and take ownership of your new home.
Comparing VA Loans with FHA and Conventional Loans
When deciding between a VA loan and another type of loan, you’ll want to consider several factors.
One of the first things to consider is your down payment. VA loans typically don’t require a down payment, while FHA loans require at least 3.5%. Conventional loans can require as little as 3% or as much as 20% or higher.
You should also factor PMI into your decision. VA loans don’t require PMI, whereas other types of loans can require PMI. Depending on your financial situation, it may be better to avoid this additional monthly expense.
It’s also important to make sure that your household is eligible.VA loans are only available to veterans, active-duty service members, and surviving spouses. Other loan types are generally available to all qualified borrowers.
VA Loan Interest Rates
VA loan rates are often more competitive than conventional loan rates, offering significant savings over the life of the loan. Rates can vary based on the lender, market conditions, and your credit profile. It’s essential to shop around and compare rates from multiple VA-approved lenders to get the best deal.
Factors Influencing VA Loan Rates
Several factors can influence the interest rate on a VA loan, including:
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Credit Score: Higher credit scores typically qualify for lower rates.
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Loan Term: Shorter loan terms often come with lower interest rates.
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Market Conditions: Economic factors and Federal Reserve policies can affect overall interest rate trends.
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Loan Amount: Larger loan amounts might have different rates compared to smaller loans.
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Discount Points: Paying discount points upfront can lower your interest rate.
Can You Have Two VA Home Loans?
In certain situations, you can have more than one VA home loan at once. It is important to speak with your lender to confirm the rules in your situation. For example, you may be allowed to have more than one VA loan if you have remaining entitlement or if you need to relocate for work but want to keep your current home.
How to Use Your VA Loan Entitlement for Multiple Loans
If your original VA loan did not use all of your entitlement, you can use the remaining portion for a second loan. If you’ve paid off your previous VA loan and sold the property, you can apply to have your entitlement restored for a new loan.
Each VA loan requires you to occupy the home as your primary residence, but exceptions can be made for certain circumstances like job relocations. You can consult the VA website for more information on using VA loan entitlement for multiple loans.
Qualifying for a VA Mortgage in 2024
Qualifying for a VA mortgage in 2024 offers a pathway to homeownership for veterans, service members, and surviving spouses with numerous benefits, including no down payment and competitive interest rates. By understanding the eligibility requirements, benefits, and the application process, you can take full advantage of what VA loans offer. To learn more about housing benefits that you may qualify for, check out our list of housing programs.
