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VA loans are a no money down mortgage offered to active duty servicemembers, military veterans, and some military spouses. VA loans are issued by mortgage lenders and banks but are guaranteed by the Department of Veterans Affairs (VA).
Because of the VA guarantee, lenders can offer loans with $0 down to veterans who qualify. VA loans also have no monthly mortgage insurance premium, also known as private mortgage insurance (PMI).
A VA home loan can be a powerful way for veterans to purchase a home or refinance an existing mortgage. If you're interested in exploring VA loans for your next home purchase or refinance, it's important to speak with an experienced lender who can help guide you through the process and answer any questions that you may have along the way.
VA loans may offer lower interest rates and more flexible terms than other types of mortgages. With careful planning and proper guidance from a qualified lender, VA loans can be an excellent option for any veteran looking to purchase or refinance their home.
In this post:
VA Loan Ultimate Guide
I built the VA Loan Ultimate Guide to explain the confusing VA loan process.
- What is a VA loan?
- How to determine if you are eligible for a VA loan?
- How to get a VA loan Certificate of Eligibility?
- What credit score do you need for a VA loan?
- What is the VA loan process, from start to finish?
- Who are the best VA loan lenders?
- What is a VA cash-out refinance loan?
Here's a podcast episode from my Military Money Manual Podcast all about using the VA loan:
VA Loan Requirements
Lenders of VA loans set requirements for mortgages in addition to those set by the VA. Typical VA loan requirements include:
- Sufficient reliable income to repay the loan
- Acceptable levels of debt or debt to income ratio
- A credit score eligible for a VA loan
Other VA Loan requirements include having enough income to make monthly mortgage payments, as well as good credit and no debt other than the VA Loan itself or your current VA mortgage. There may be other restrictions on VA Loans depending on the specific lender or location. Overall, these loans can help make home ownership more accessible to veterans and service members who qualify.
VA Home Loan Program Eligibility
To be eligible for a VA mortgage, you must meet certain eligibility requirements. These requirements include at least 90 days of active duty wartime service or 181 days of cumulative active duty if VA-required training is included in the period. In addition, you must have been honorably discharged from the military.
You may be eligible for a VA loan by meeting one or more of the following requirements:
- You served 90 consecutive days of active service during wartime.
- You served 181 days of active service during peacetime.
- You have 6 years of service in the National Guard or Reserves.
- You are the spouse of a service member who has died in the line of duty or as a result of a service-related disability.
A COE certifies to a lender that you are eligible for a VA home loan.
How to Apply for VA Certificate of Eligiblity
To apply for VA loan eligibility, you will need to pull a Certificate of Eligibility from the VA eBenefits website. Any VA approved lender can also pull your COE for you with your name, Social Security number, and date of birth.
You will also need to supply proof of any military service that you have previously completed to qualify for VA loan eligibility.
Two out of every three veterans are automatically issued their certificate of eligibility (COE) through the VA.gov eBenefits website. You an find your COE at eauth.va.gov/ebenefits/coe.
Once you have submitted your VA loan application and any required documents, the VA will review your application and decide about your eligibility. If you are approved, you will be able to take out a VA-backed loan from a lender of your choice, allowing you to enjoy all the benefits of being a veteran while purchasing the home of your dreams.
Types of VA Loans from the Department of Veterans Affairs
VA Purchase Loan
A VA purchase loan is a mortgage to purchase a home or any of the qualifying types of properties:
- Buy a single-family home, up to 4 units
- Buy a condo in a VA-approved project
- Buy a home and improve it
- Buy a manufactured home or lot
- Build a new home
- Make changes or add new features (like solar power) to make your home more energy efficient
You can borrow up to the conforming loan limit for the area you are buying. The conforming loan limit is the largest dollar amount of a mortgage that Freddie Mac and Fannie Mae are willing to buy or guarantee.
Usually, you will not pay a down payment, you can get better terms and interest rates, fewer closing costs, and there's no need for private mortgage insurance (PMI) or mortgage insurance premiums (MIP), because of the VA loan guarantee.
The VA IRRRL Program, also known as the VA Streamline Refinance Program, is a mortgage refinancing option available to homeowners with existing VA loans. VA IRRRL loans are intended to provide borrowers with a lower interest rate or monthly payment, or both.
A VA IRRRL or Interest Rate Reduction Refinance Loan allows you to refinance your existing VA loan.
The VA IRRRL is sometimes called a “streamline” refinance. With these types of VA loans, you can:
- Lower your monthly mortgage payment by getting you a lower interest rate, or
- Make your monthly payments more stable by moving from a loan with an adjustable or variable interest rate (an interest rate that changes over time) to one that’s fixed (the same interest rate over the life of the loan)
You may be eligible for a VA IRRRL if you meet all of these requirements:
- You currently have a VA-backed home loan, and
- You’re using the IRRRL to refinance your existing VA-backed home loan, and
- You can certify that you currently live in or used to live in the home covered by the loan
To be eligible for the program, homeowners must have made all their VA loan payments on time for the previous 12 months. In addition, they must not have been delinquent on any non-VA debt payments during that time.
The maximum loan amount for a VA IRRL loan is the lesser of the borrower's outstanding principal balance on their existing VA loan or the conforming loan limit for the county in which the property is located.
The interest rate on a VA IRRL loan is generally lower than the interest rate on a new VA loan, and there is no minimum credit score requirement. For these reasons, the VA IRRL Program can be an attractive option for eligible homeowners who are looking to refinance their existing VA.
VA Cash-Out Refinance
A VA cash-out refinance allows you to take cash out of your home equity or refinance a non-VA loan into a VA-backed loan. A VA refinance is a great way to get cash out of your home equity.
You can use the cash for any purpose, including paying off debt, making home improvements, or investing in a business. VA refinances are available with fixed-rate or adjustable-rate mortgages, and you can choose a term that fits your needs.
Best of all, VA refinances come with no origination fees or prepayment penalties. If you're looking for a way to get cash out of your home equity, a VA refinance is worth considering.
VA Energy Efficient Mortgage
VA Energy Efficient Mortgages, or VA EEMs, are special home loans designed to help military families make environmentally conscious upgrades to their homes.
VA EEMs enables borrowers to borrow extra funds to pay for the costs associated with improvements like adding insulation or installing more energy-efficient windows and appliances.
VA EEMs is specifically designed for veterans and military families, providing them with an easy and affordable way to reduce their energy usage and save money on their utility bills.
Whether you are planning a home renovation project or simply looking for ways to be more environmentally friendly, VA EMM can help you reach your goals.
Advantages of a VA Home Loan
Here's a podcast I recorded with Rich Carey from Rich On Money about investing while on active duty and using the VA loan to purchase rental properties.
A VA Loan can be one of the most powerful benefits available to military personnel like you to achieve your financial goals of homeownership and financial independence.
Offering unique benefits to active duty, reservists, national guardsmen, and of course, veterans, the VA Home Loan is one of the best ways to purchase a home.
The distinctive advantages of a VA Home Loan include:
- No money down, meaning you can start looking for a home today
- Competitive interest rates, saving you potentially thousands over the course of the loan
- No Private Mortgage Insurance (PMI), which can save you hundreds of dollars every month
All of these benefits are unavailable to the general population and can put home ownership within the reach of every rank, officer or enlisted. Many banks have been tightening lending and credit standards for years since the 2008-2009 financial crisis and may not understand your military income or unique situation. A VA loan can be the easiest and cheapest path toward home ownership for you and your family.
Disadvantages of a VA loan
VA loans are a great benefit for eligible veterans, but there are some potential downsides to be aware of.
On disadvantage is VA loans are only available from approved lenders, so it's important to compare rates and terms from multiple lenders before choosing a loan.
Another potential downside is that VA loans can only be used for certain types of properties, such as single-family homes, condos, and manufactured homes.
Finally, there are additional inspections required
VA loans can be a great option for eligible veterans, but it's important to weigh the pros and cons before deciding if this type of loan is right for you.
What are the VA Home Loan Rates Today?
VA home loan rates are determined by several factors, including the type of loan, the size of the down payment, and the borrower's credit score. VA loans are available in both fixed-rate and adjustable-rate varieties, so borrowers can choose the loan that best suits their needs.
VA home loan rates are typically lower than conventional mortgage rates, making these loans an attractive option for qualified veterans and active-duty military members. Rates may also change over time, depending on market conditions.
Borrowers can check the current VA home loan rates online or by contacting a VA-approved lender. VA-approved lenders are experienced in processing VA loans and can help borrowers compare different loan options to find the best rate.
VA Home Loan Credit Score
When it comes to getting a VA home loan, one of the most important factors is your credit score. Generally, you will need a minimum credit score of at least 620 to qualify for a VA loan.
However, this number may vary depending on the lender or bank that you are working with. Additionally, while a lower credit score will generally make it more difficult to get approved for a loan, having an excellent credit history can help you get better terms and lower interest rates.
If you are looking to buy a home using a VA loan, be sure to always keep track of your credit score and take steps to maintain and improve it as needed. Having good credit will help ensure that you qualify for the very best rates available – helping you get into your dream home sooner rather than later!
How Long Does the VA Loan Process take?
The VA loan process can vary depending on several factors, including the type and size of the property you are looking to buy, as well as your lender.
In general, it typically takes between two and three months from the initial application until you receive final approval for your VA home loan. It's important to get an early start! This timeline includes assessments of creditworthiness and verification of necessary paperwork, such as income tax returns, veteran's documents, employment information, and banking records.
Additionally, there are often several steps that must be completed during this period, including obtaining a home appraisal and finalizing all relevant contracts with your lender.
Overall, the VA loan process is usually an involved and time-consuming process, but it ultimately leads to secure home financing for qualified veterans who are looking to purchase or renovate a home.
What are the Home Inspection Requirements for a VA Loan?
The Department of Veterans Affairs (VA) does not require a home inspection as part of the loan process, but it is highly recommended. However, the VA does require a VA home appraisal.
The VA appraisal is an assessment of the property’s value and condition by an independent VA appraiser. VA appraisals are required for every VA purchase loan.
The appraisal is NOT a home inspection. A home inspection provides a more in-depth review of the home's physical condition.
A home inspection is conducted by a professional inspector and can identify potential problems that may not be visible to the naked eye. These problems could include structural issues, electrical problems, or plumbing issues. If these problems are not addressed, they could lead to expensive repairs down the road.
Furthermore, a home inspection can give you peace of mind knowing that your new home is in good condition. For these reasons, it is highly recommended that you get a home inspection before closing on your VA loan.
Is it hard to get approved for a VA home loan?
Speaking generally, the answer is no – it's not hard to be approved for a VA home loan. But, there are a few things that you will need to keep in mind.
First and foremost, you'll need to have a strong credit score. The VA loan lending companies consider several factors when determining your creditworthiness, including your payment history, your current debt levels, and your credit utilization ratio.
If you have a strong credit score, you're more likely to be approved for a loan. Additionally, lenders also requires that you have a steady income and sufficient savings to cover your down payment and closing costs. If you can meet these requirements, you're likely to be approved for a VA home loan.
A VA loan is offered to eligible military servicemembers and veterans to purchase homes. The program was created in 1944 to help returning soldiers afford homes. Over 20 million military personnel have taken advantage of this unique, military only opportunity.
Eligible purchases include first time homebuyers, homebuyers with 1 or more properties, refinancing a non-VA loan or VA loan mortgage, lowering your monthly payments OR allowing you to take equity out of your home.
Rental properties (investment properties) can be purchased with a VA loan as long as you occupy at least one unit of the property. For instance, you could buy a fourplex and rent out three of the units, while living in the fourth. Or, if you get PCS orders, you could rent out your primary residence while it was still under a VA loan. You must intend to occupy the home for at least 1 year to use a VA loan.