How to apply for a VA loan
VA mortgages provide an excellent financing option for military families looking to invest in a home. Despite all the advantages that come with these loans, they do require some extra steps to apply, which leads to the assumption that the process is overly complicated.
Applying for a VA home loan might stray from the conventional loan process, but that doesn’t mean it’s difficult to do. Let’s break it down step by step for a clearer picture on how to apply for a VA loan.
How to qualify for a VA loan
One of the first steps on your VA mortgage journey will be determining whether you qualify in the first place.
Eligible borrowers are usually military service members or surviving spouses with a relatively clean financial background and service history. Let’s take a closer look at these VA mortgage requirements and how you can be eligible for this type of loan.
- Active duty members need to have served 90 consecutive days.
- Veterans must meet the length-of-service standards, according to VA.gov.
- Service members must complete 90 days of active duty, or six years in the National Guard or Selected Reserve.
As the spouse of a military member, you may be eligible for a VA mortgage if you meet these requirements:
- You have not remarried.
- The spouse was killed in service or from a service-related disability.
- The spouse was missing in action or a prisoner of war for at least 90 days.
- The spouse was rated disabled and was eligible for disability compensation at the time of death.
Once you’re certain that you qualify for a VA mortgage, you’ll have to decide which type of VA financing suits your homebuying goals.
Types of VA mortgages
There are two main types of VA home loans, which carry important differences that impact what you’ll pay over time:
VA direct home loan
On a VA direct loan, financing is provided by the Department of Veterans Affairs, rather than via a third-party lender. Your application will be submitted and reviewed by the VA, with all associated fees and closing costs paid directly to the department.
This type of VA loan is only available to veterans or spouses who are Native American, and is part of the VA’s Native American Direct Loan program, or NADL. According to VA.gov, home loans provided through the NADL often come with better terms than a mortgage from a private lender.
VA-backed home loan
If you don’t qualify for a VA direct loan, you’ll have to apply for a VA-guaranteed loan. In this scenario, the financing would come from a VA-approved lender, rather than the VA itself. These lenders adhere to the VA’s standards to offer affordable mortgage plans for service members and their families.
The VA also guarantees that lenders who issue VA mortgages will have their loans backed up should the home fall into foreclosure. This guarantee only works to protect the lender, not the borrower. By providing some added government assurance, lenders can be more flexible with mortgage approvals and offer terms that are typically better than conventional home loans.
Finding a VA-approved lender
Not all lenders are the same, and many focus exclusively on conventional, fixed-rate mortgages. If you’re looking to secure a VA mortgage, you’ll have to work with a VA-approved lender.
Approved lenders are able to issue these mortgages when the terms comply with the regulatory requirements laid out by the Department of Veterans Affairs.
While the VA sets the eligibility standards for VA mortgages, your lender will typically determine interest points and expense requirements of their own, increasing the overall cost of your mortgage. It’s always a good idea to meet with multiple lenders for a well-rounded understanding of your financing options and how you can get the best deal.
Check out the VA’s website for more lender information and how to find approved financing options in your area.
As of Oct. 8, 2021, Guaranteed Rate is now offering up to 100% max LTV (loan-to-value ratio) on VA cash-out refinances up to $1.5M. Most lenders and cash-out loans cap your LTV at 90% for VA loans, which means a smaller loan for you. However, a Guaranteed Rate VA loan offers cash-out refinances with an LTV of 100%, putting more money in your pocket.
Certificate of eligibility
Before you even apply for a VA home loan, you’ll need to obtain your certificate of eligibility, or COE. As a VA loan borrower, the COE allows you to demonstrate your history of military service to a lender and ensures that you qualify for a VA loan. These important documents can be obtained by active service and national guard members, veterans and families of service members.
While a COE won’t guarantee your loan will be approved, it does verify that the process can move forward and helps avoid complications that could come up further on. A COE is also not necessary to apply for a VA loan, as lenders can check your eligibility status via the VA’s automated system.
Depending on your service history and current status, your proof of service requirements may vary. Some lenders might also request to verify your discharge or separation papers, history of retirement benefits and any signed statements of service. Be sure to check with your specific lender about their proof of service requirements.
If you haven’t met the minimum service requirements, you might still be able to obtain a COE. If you left the military due to a medical condition, reduction in forces or other external forces, the VA may issue a COE.
When it’s finally time to start looking for your new home, you’ll have to find one that fits within your borrowing limits. For a precise estimate of how much they’ll be able to afford, savvy borrowers will seek out mortgage prequalification. While this is not a required step in the VA mortgage application process, it can greatly benefit your homebuying experience.
If you choose to get prequalified, you’ll provide documentation that outlines your financial situation, such as bank statements, pay stubs and credit reports. This information is then reviewed by your lender, who is able to determine if you're an acceptable candidate for a loan, and if so, what kind of mortgage rate will be offered.
Lenders will also review your credit score. While the VA does not set a credit score minimum on mortgages, your lender will have their own standards when they issue you a loan.
Prequalification won’t guarantee that your loan gets approved, but by working with a lender early on the process, you can avoid any missteps or potential issues that could cause your application to fall through.
Underwriting & VA appraisals
After you’ve met with a real estate agent, found your ideal home and signed a purchase agreement, you’re ready to bring it to your lender for mortgage approval.
The final review and verification of your documents is known as underwriting, and can take several days to wrap up. During this process, you’ll be continually handing over documentation as requested by your lender as they work out the terms of your loan. As part of underwriting, a VA appraisal of the property will also need to be scheduled.
Home appraisals are conducted to ensure the amount lended matches up with the true market value of the home. Your VA appraiser will confirm this, in addition to making sure the property holds up to the VA’s minimum property requirements, which can be viewed via the VA’s website.
Applying for a VA loan might be a bit different than the conventional mortgage process, but still presents a favorable home financing plan for service members and surviving spouses who qualify.
If you’re confident you have a solid grasp on how to apply for a VA loan, then you can get started on your mortgage application today.
Guaranteed Rate, Inc. is a private corporation organized under the laws of the State of Delaware. It has no affiliation with the US Department of Housing and Urban Development, the US Department of Veterans Affairs, the US Department of Agriculture or any other government agency.
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