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.
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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:
→ 90 continuous days for active duty service members
→ 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
→ A Certificate of Eligibility from the VA Department
Then, you can request a certificate of eligibility (COE) online at the VA Department or ask your lender to request one for you. To apply, 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
→ 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
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 recent LendingTree study, borrowers who shopped around saved on average, over $60,000 over the lifetime of their loans.
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.
Here are the documents you’ll need to get a VA loan:
- Certificate of Eligibility (COE)
- DD 214 (discharge or separation paperwork)
- Leave and earnings statement if you’re on active duty
- Pay stubs from the past 30 days
- Two years of W2s
- 60 days of bank statements
- Letters of explanation for any large deposits in asset accounts, gaps in employment or credit issues
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 on a VA home loan are similar to any other mortgage closing for a purchase or a refinance and include:
- 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 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
If you want to know how to get a VA loan without paying closing costs, you have three options: you can ask the sellers to pay them, ask a relative to give you the funds or you can ask your lender to pay your closing costs in exchange for a higher interest rate. You can also wrap the closing costs into your VA loan.