How To Get A VA Home Loan

When it comes to mortgage products, it does not get better than the VA loan.  With no down payment, no private mortgage insurance, and some of the lowest interest rates around, they are basically the best deal you can get when buying a home.

But who is eligible? And how does the process differ from other mortgage options on the market?  Here is a quick breakdown of what getting a VA loan looks like:

1.  Determine Your Eligibility

VA loan eligibility is directly tied to military service.  Only military members, veterans, or spouses of these parties are eligible to apply for a VA loan, and only if certain service requirements are met.

Specifically, a military member must:

• During wartime:  Have served at least 90 consecutive active-duty days (no dishonorable discharge allowed) or served less than 90 days active-duty during wartime if discharged for a service-related injury or disability.
• During peacetime:  Have served at least 181 days continuous active duty (no dishonorable discharge allowed) or served less than 181 days if discharged for a service-related injury or disability.
• Be on current active duty for at least 90 days
• Have served at least six years in the reserves or National Guard.

If you are a surviving spouse interested in a VA loan, you must meet one of the following qualifications:

• Your spouse died during service or due to a service-related injury.  (If you have remarried, your qualification may depend on when and at what age.)
• Your spouse is currently MIA or a prisoner of war.
• You are receiving Dependency and Indemnity Compensation benefits.

Some public health service officers, U.S. military cadets, academy students, midshipmen, merchant seamen, and officers with the National Oceanic and Atmospheric Administration may also be eligible.

Other than proof of military service requirements noted above, there is not much else you will need to qualify for VA financing.  The VA does not have a minimum credit score requirement (though individual lenders usually do), and there is no set loan-to-value threshold you have to fall under.  As for debt-to-income ratio, you typically need to under 41% once your new mortgage payment is factored in, though some lenders will consider you up to 50%.

2.  Find A VA Lender

VA loans are only available through approved VA lenders, so you may need to shop around a bit to find one.  Many large banks and well-known lenders will offer them, and there are also VA-specific lenders you might look to, like Veterans United and Veterans First.

3.  Get Your COE

To prove you meet the VA's eligibility requirements for service, you will need to apply for your Certificate of Eligibility (COE) on teh Department of Veterans Affair's eBenefits portal.  The exact form your COE will take depends on your military branch.  For many, it is DD Form 214.  For those in the National Guard or Reserves, it will be NBG Form 23 or NGB Form 22.  If you are on active duty, you will get what's called a Statement of Service.  Whatever form it takes, your COE will be a vital part of your VA loan application process.

A note for spouses:  To get a COE as a surviving spouse, you will need to fill out VA Form 21P-534EZ and submit your marriage license, your spouse's separation paperwork, and their death certificate.  If you are already receiving Dependency and Indemnity Compensation, you can fill out VA Form 26-1817 and submit with your spouse's separation paperwork.

4.  File Your Application And Submit Your Documentation

Fill out your chosen VA lender's application and begin submitting your financial documentation.  They will need:

• Your COE
• Your tax returns
• Your bank statements
• Recent W-2s and pay stubs to prove your income

It is best if you have these gathered and organized before applying so this step does not slow you down or delay your purchase.

5.  Find The Right Home And Submit Your Offer

Your next step is to find the right home.  Remember that it must either be a single-family home, manufactured home, or condo unit in a VA-approved project.  You can also use VA loans toward new construction.  They cannot, however, be used to buy multifamily or investment properties.  The home must be your intended primary residence.

6.  Await Your Appraisal

Your lender will order an appraisal of the home to determine its estimated market value, which will then act as your maximum loan amount.  If you offered more than the market value for the home, you will need to come up with the difference out of pocket or renegotiate with the seller for a lower price.  Your VA lender will only loan you what the home is currently worth.

A quick note here:  The VA appraisal is unique in that it's not only about determining a property's value.  The appraiser will also look to ensure the property meets the minimum property standards set by the VA.  These are designed to ensure the home is safe, sound, and free of hazards.

7.  Close On Your Loan

Finally, your lender will set a closing appointment, and you will sit down to sign your papers and close on your loan.  This is also when you will pay your closing costs.  There is no down payment required, but if you opt to make one (it can lower your monthly payments and interest costs), you will do that at this time as well.

The Bottom Line

VA loans can be a great way to finance a home purchase, but hey are not an option for everyone.  If you are eligible, you will need to get your COE in order, prep your documents, and start researching VA lenders.  Waiting to do these will only delay your closing and subsequent move-in.