U.S. Military veterans, servicemembers and other eligible home buyers may wonder how to apply for a VA home loan. Applicants complete two approval processes for VA loans. The first establishes eligibility for home loan benefits by obtaining a Certificate of Eligibility (COE) from the VA. The second step is applying for VA home loan approval through a VA mortgage lender.
The VA provides a variety of home loan programs to assist eligible borrowers with building, purchasing, refinancing, renovating and adapting new or existing homes. VA loan options also include a VA-to-VA loan refinance program called the Interest Rate Reduction Refinance Loan (IRRRL). The VA does not act as a mortgage lender; it guarantees mortgage lenders against losses on loans made under its programs. The VA Home Loan Guaranty division works with a network of approved lenders to provide home loans.
Obtaining a Certificate of Eligibility
The VA issues a COE based on status (regular or guard), dates and type of military service. Surviving spouses of deceased eligible veterans and servicemembers may also qualify for VA home loan benefits. Loan applicants can request a COE in three ways:
- Surviving spouses can only apply by submitting VA form 26-1817, the Request for Determination of Loan Guaranty Eligibility-Unmarried Surviving Spouses.
- Not all applications for a COE can be completed through approved mortgage lenders, as the VA may not have sufficient information in its files to issue a Certificate of Eligibility.
- Receiving a Certificate of Eligibility does not guarantee approval for a home loan. It only verifies a mortgage applicant's eligibility to apply for a VA mortgage.
The second application process required for a VA loan is applying for a loan with a VA approved mortgage lender.
Why VA Home Loans?
VA home loan programs are offered by the U.S. government to eligible applicants. The VA promotes several reasons to consider a VA home loan. Benefits include:
- 100 percent financing -- no down payment required (there are closing costs involved, but the VA allows sellers to pay them for buyers -- up to four percent of the property value / appraised value for most types of charges).
- No private mortgage insurance: In most cases, mortgages of more than 80 percent of a home's appraised value require some form of mortgage insurance . VA does charge a funding fee for each loan -- depending on the applicant's classification (regular or guard), usage (first-time or subsequent) and down payment. Funding fees are waived for those who were disabled in the line of duty or who later became disabled as the result of an injury sustained on active duty.
- VA loans are assumable: according to VA guidelines, a VA loan can be assumed by any buyer who meets VA loan approval requirements.
How to Apply for a VA Home Loan
These tips can help home loan applicants navigate the VA home loan application process:
- Order credit reports and scores: although the VA itself doesn't require a minimum credit score, VA lenders typically set the bar at 620 or more.
- Shop for a VA home loan before looking at homes and request multiple quotes from competing mortgage lenders. The VA explicitly states that the government does not set interest rates for VA mortgages and recommends that borrowers compare quotes from several lenders.
- List questions and concerns when reviewing mortgage quotes. Contact mortgage lenders for clarification if needed.
- Advise mortgage lenders of special situations. For example, if a home must be adapted to accommodate accessibility needs, the ebenefits center can help loan applicants apply for VA grants that can be used along with VA loan proceeds to make required accommodations.
- VA guidelines require lenders to verify and review applicants' employment, income, and assets and obligations. Follow lender instructions carefully; this helps with avoiding delays caused by missing or incomplete documentation.
Home loan applicants can support the loan approval process by keeping in touch with loan officers and updating contact information as needed.