VA home loans offer several benefits to veterans, surviving spouses and active duty personnel who qualify. A VA home loan is typically provided to qualifying applicants through an eligible lender. A portion of the loan itself is guaranteed by the Department of Veterans Affairs (VA), allowing lenders to offer better mortgage rates and reduce mortgage eligibility requirements. However, in some cases, the loan is provided directly through the VA.
There are several VA benefits offered to qualifying loan applicants, including but not limited to the following:
- No down payment, so long as the sale price of a home does not exceed the appraised value of the home.
- No private mortgage insurance premium requirements.
- Closing costs may be reduced or eliminated.
- You cannot be charged a penalty fee for paying off your loan early.
- Assistance programs may be available if you later run into difficulties making payments.
Before reviewing VA home loan rates, it is important to learn about the various types of VA loan available and the eligibility requirements that must be met.
What is a VA home loan?
VA home loans are mortgages that are either partially guaranteed by the Department of Veterans Affairs or provided by the VA. A VA home loan offers numerous benefits to applicants who qualify for the program by meeting service qualifications, credit score minimums, debt to income ratio requirements and income guidelines.
You must meet VA home loan requirements and obtain a certificate of eligibility before submitting an application for one of the types of loans offered by the VA. Some eligibility requirements will vary by the type of loan, so it is important to review the types of loans that may be available to you.
What types of VA home loans are available?
If interested in a VA home loan, it is important to learn about the various types of loans available in order to determine which loans you may qualify for. In doing so, you will be better prepared for the application process.
A VA purchase loan aids in the initial purchase of a home by guaranteeing a portion of a mortgage offered by a lender. This type of loan offers competitive interest rates that are generally far lower than that of traditional mortgages.
Interest Rate Reduction Refinance Loan (IRRRL)
If you already have a VA home loan and you are struggling to make payments, you may be eligible for a reduced interest rate when refinancing an existing VA loan. In addition to refinancing an existing VA loan, qualifying applicants can refinance a VA adjustable rate mortgage (ARM) into a fixed rate mortgage, potentially saving money over the life of the refinanced loan.
Cash-out refinance loans are used to cash out a home equity in order to pay down other debts or make improvements to the home. This type of loan is also an option if you currently have a mortgage that is not a VA loan, but you would like to refinance into a VA one.
Native American Direct Loan (NADL)
Unlike other VA home loans, the Native American Direct Loan is provided directly by the Department of Veterans Affairs. This type of loan is designed to aid Native American veterans in the construction, purchase, improvement or refinancing of a home that is located on Native American trust lands. To qualify, the applicant’s tribal organization must participate in the VA direct loan program in addition to meeting other VA qualifications.
In addition to the NADL and other VA home loans, there are a number of housing grants offered to eligible veterans who have certain permanent and total service-connected disabilities. These grant programs include:
- Special Adapted Housing (SAH) Grant.
- Special Housing Adaptation (SHA) Grant.
- Temporary Residence Adaption (TRA) Grant.
VA housing grants include additional eligibility requirements, primarily related to the applicant’s service-connected disability.
What is a VA certificate of eligibility?
The VA home loan certificate of eligibility is provided by the Department of Veterans Affairs after an applicant has met eligibility requirements. This certificate must then be provided to lenders in order to proceed with a VA loan application.
To meet VA benefits eligibility requirements, an applicant must meet service-length related requirements, intend to occupy the new home as a personal residence and must either be an active-duty military personnel or a veteran that was discharged under conditions that were not dishonorable. If you do not meet service-length requirements, you may still qualify for a loan if you were discharged for one of the following reasons:
- Certain medical conditions.
- A service-connected disability.
- A reduction in force.
- The convenience of the government.
Additionally, VA home loans are available to surviving spouses of a veteran, as long as any one of the following applies:
- The applicant did not re-marry and the applicant’s veteran spouse died either while in service or from a service-connected disability.
- The applicant is the spouse of a service member that is currently a prisoner of war (POW) or missing in action (MIA).
- The applicant is a recipient of Dependency and Indemnity Compensation (DIC) benefits, in cases where the veteran’s death was not service-connected.
To qualify for a VA home loan, applicants must also meet credit score and income requirements. Upon application, debt-to-income ratio is also reviewed and will assist in determining eligibility and maximum loan amounts.
Application Process for a VA Home Loan
By learning how to apply for a VA home loan, you will be better prepared for the application process. Your VA benefits eligibility must first be accessed by applying for a Certificate of Eligibility (COE). You can apply for a COE online, by mail or through an approved mortgage lender. Depending on your service-related status, you may also be required to provide the Department of Veterans Affairs with additional information and documentation, including:
- A copy of discharge or separation papers (DD 214) (veterans only).
- A statement of service that has been signed by a commanding or personnel officer (active-duty military personnel only).
After obtaining a VA home loan Certificate of Eligibility, you must apply for the appropriate loan program through your chosen mortgage lender. The Department of Veterans Affairs only provides mortgages directly through the Native American Direct Loan program. All other VA loans must be applied for through an approved mortgage lender.
If you are having trouble finding an approved mortgage lender, you can contact your local VA office to obtain a list of local lenders within your area that have been approved for VA loans. Alternatively, you can also contact local lenders in order to inquire as to whether or not they offer VA loans.