How to Get a VA Loan for a New House in 14 Steps
The VA loan program provides incentives for veterans to finance their next home purchase. Learn how to get a VA loan following these straightforward steps.
With the long-term costs of homeownership, borrowers need to find the right home loan. For veterans and active-duty service members, the VA loan program from the U.S. Department of Veterans Affairs is often the top choice for financing a new home. A VA loan is a type of home loan offering special features that can make buying a home more affordable for veterans and active-duty service members.
Military members and veterans searching for their next home may find themselves wondering, “How can I get a VA home loan?” The process usually takes a few extra steps—but the potential cost savings can be worth it. This guide will walk home buyers through the process of how to get a VA loan.
Before You Begin…
It’s important to note that VA loans come from private mortgage lenders, such as banks, credit unions, or mortgage companies. Many people mistakenly think the government offers home loans directly to borrowers, but this is not the case. VA loans are a type of government-backed mortgage program, not an actual loan from the VA, and the Department of Veterans Affairs guarantees a portion of the loan. If the borrower can’t make payments and the loan goes into foreclosure, the VA pays the lender the guaranteed part of the loan.
This guarantee often makes the loan a safer option for lenders. In turn, they often offer better loan terms to VA borrowers. This typically includes no down payment requirement, lower interest rates, and no mortgage insurance for borrowers. Eligible borrowers wondering how to apply for the VA home loan program can follow a series of steps to help them get started.
STEP 1: Take stock of your current financial situation, borrower qualifications, and ability to repay a mortgage.
The first thought for many veterans who learn about the VA program is “How can I get a VA loan?” As for any mortgage, a borrower will first want to consider their financial situation. Even with the VA guarantee, borrowers need to meet lenders’ eligibility requirements for mortgage products. Requirements from lenders tend to include credit score and income minimums. The VA has no specific credit requirement for the program (though individual lenders generally do), which can help veterans who may need to determine how to get a home loan with bad credit.
A good place for potential borrowers to start is to check their credit scores. The higher a borrower’s credit score, the more likely they will qualify for a better loan rate. Borrowers might also want to create a monthly budget to help determine how much house they can afford. This can be achieved by adding up monthly income and subtracting monthly expenses, such as car insurance, healthcare premiums, and groceries. The leftover amount gives the borrower an idea of how much they can afford to spend per month on a mortgage payment.
STEP 2: Verify your VA loan eligibility.
VA loans are only for eligible veterans, active-duty service members, and surviving spouses. Borrowers who ask, “How do you get a VA loan?” may want to start by checking their eligibility for the program before starting the house-hunting process and applying for VA loans. This can help them spot and correct any errors ahead of time to prevent a delay in the loan process.
To qualify for the VA loan program, active-duty service members must have at least 90 days of continuous service. Veteran eligibility, on the other hand, depends on when the potential borrower served. Those who served in wartime usually have lower service time requirements than those who served in peacetime. Additionally, in some cases, spouses of veterans may be eligible for a VA loan. Generally speaking, only surviving spouses of veterans who died in service or from service-related injuries can receive VA loan benefits, and the surviving spouse must not have remarried after the veteran’s death.
STEP 3: Decide on the VA loan type, amount, rate, and terms you want.
After determining eligibility, veterans can start comparing loan terms that complement their financial situation. The three main types of VA loans are:
- VA Purchase Loan: Purchase loans let borrowers use loan funds to buy their new house.
- VA Interest Rate Reduction Refinance Loan (IRRRL): The IRRRL program helps veterans with existing VA-backed loans reduce their interest rates and lower their monthly payments.
- VA Cash-Out Refinance: A cash-out refinance lets the borrower take out part of their home equity to use as cash by refinancing into a new loan.
In addition to the type of loan, borrowers may want to think about the amount they plan to borrow. Borrowers will want to consider their budget when determining how much home loan they can afford. Other things borrowers will want to take into account when comparing VA loans are the interest rate and term length for each loan.
STEP 4: Shop around with different mortgage lenders.
Now that the borrower has an idea of the type of loan they want, they can start shopping around at the best mortgage lenders. Not all mortgage lenders are VA approved, so borrowers will want to ask each lender whether they offer VA loans. Some mortgage lenders even focus solely on VA loans.
Once borrowers have a list of VA-approved lenders, they can look through the VA loan offerings for each company. Even within the VA loan program, different lenders will offer different interest rates, loan terms, and loan products. For example, one lender may only offer purchase loans, while another offers both purchase and cash-out refinance loan options. An important part of the process to get a VA loan is to find the lender that offers the best rates and terms for the borrower.
STEP 5: Choose a VA-approved lender with financing terms that suit you.
The next step is choosing a lender, but some borrowers may wonder how to choose a mortgage lender that’s best for them. Many borrowers make a short list of the best VA mortgage lenders to help them sort through their options. This might include using a spreadsheet to help organize lenders and their offerings. Borrowers can then easily look through their lists and compare lenders to see which one offers the best terms for the type of loan they want.
It’s usually a good idea for VA-loan-eligible borrowers to verify loan terms and eligibility requirements once they’ve found a lender they want to work with. This is easily done by reaching out to a loan specialist or VA loan officer. A loan officer should be able to tell the borrower the current interest rates and any requirements for a specific loan, such as the minimum allowable credit score.
STEP 6: Request a Certificate of Eligibility (COE) from the VA.
Borrowers wondering “How do I get a VA loan if I’m an eligible veteran?” can prove their veteran status by requesting a Certificate of Eligibility (COE). This document comes from the VA and shows that a borrower is eligible for the program. Borrowers will need to show proof of service to get their COE, such as a copy of their discharge or separation papers. Some lenders may be able to use an online system to get a borrower’s COE. If a lender doesn’t have this option, veterans can fill out the VA form to request a COE and mail it to their regional loan center at the address found on the last page of the request form.A COE also provides a lender with information about a borrower’s entitlement. Entitlement is how much money the government will pay the lender if the borrower defaults on the loan. Eligible borrowers with no current VA loan often have full entitlement. With full entitlement, buyers can borrow as much money as they are qualified to borrow without making a down payment.
STEP 7: Get preapproved for a VA loan.
In the same way that borrowers get preapproved for a conventional mortgage, those who are eligible for a VA loan may also want to seek preapproval from a VA lender. Preapproval means that the lender has looked over a borrower’s financial information and has approved a specific loan and loan amount, pending the submission of an official application. The first step for a borrower is to ask their lender how to apply for a VA home loan preapproval. This process usually includes filling out a mortgage application. The VA lender checks the borrower’s credit and verifies their income information. If the borrower meets eligibility requirements, the lender creates a VA loan preapproval letter for the borrower to show to the sellers of the home they want to buy.
This preapproval letter could put the borrower in a stronger position to secure a home since the seller will have the assurance that the financing will go through if they accept the borrower’s offer. The seller won’t have to wonder whether or not the buyer’s financing will go through if the seller accepts their offer.
Figuring out how to get a VA loan preapproval might seem daunting for first-time borrowers, but it’s a worthwhile step for buyers to take before officially starting the search for their new home.
STEP 8: Go house-hunting and find the right home for you.
The next step is often the most exciting part of the mortgage process—house-hunting. Borrowers can go to open houses or privately tour homes for sale. They can choose to shop on their own if they wish; however, many buyers (especially first-time ones) choose to work with a real estate agent to help them through the process.
While shopping for a home is often a fun and exciting experience, there are a lot of things to consider, such as:
- Where is the home located?
- Does the house have the amenities the borrower is looking for, such as a dishwasher or a fenced backyard?
- Are there other people interested in the home?
- Do any major renovations or repairs need to take place before they could move in?
If the home checks all the boxes, the buyer will be ready to put an offer together to present to the seller.
STEP 9: Make an offer on a house and agree to purchase terms with the seller.
A seller may be more likely to accept an offer from a buyer with a preapproval letter than one without. With a preapproval letter in hand, the buyer can make an offer backed by their mortgage company. The seller will be confident the buyer can afford the price of the home and will be able to qualify for a loan.
The process of making an offer on a house involves filling out an offer letter. This is a formal document letting the seller know the buyer’s requested terms of the sale. The offer letter includes information about the buyer’s financing, required inspections or reports, and custom details of the offer. For example, an offer might include a request for the seller to include certain appliances or window coverings in the sale. When both the buyer and seller agree on the terms of the sale, they sign the contract.
STEP 10: Submit your VA loan application.
Once a seller has accepted a buyer’s offer, the buyer can begin the process of applying for the VA home loan through their lender. Since many borrowers start with a preapproval, the application process is generally quite easy since much of the required information is already with the lender. The borrower may not even have to fill out another application, though the lender will likely need to verify some information with the borrower.
If a borrower hasn’t yet been preapproved or filled out a loan application, their lender will now likely ask them to complete this step. Mortgage applications will typically request information including the borrower’s employment history, income, and financial obligations (such as car payments or other debts) to get an idea of whether or not they will be able to afford to repay the loan.
STEP 11: Respond to lender requests for financial or military service documents.
The next step in how to get VA loan approval is underwriting, which is the process of the lender verifying the information provided by the borrower. Also during the underwriting process, the lender will check the borrower’s credit history and current credit score. Lenders may contact borrowers to request certain documents, such as bank statements.
VA loan lenders will also be required to verify military service. If they haven’t already, the mortgage lender will request the borrower’s COE for verification purposes.
STEP 12: Pay or finance the VA funding fee and other closing costs.
One of the biggest benefits of the VA mortgage program is the low cost of getting a loan; most veterans can get VA loans without a down payment. Interest rates also tend to be noticeably lower than those of similar conventional loans. In addition, borrowers don’t have to take out private mortgage insurance (PMI), and many VA loans have less-stringent credit score requirements and financial underwriting guidelines.
That doesn’t mean a VA loan has no closing costs. The main cost of a VA loan is the VA funding fee. This fee goes to the VA to help keep the program running for future military members, veterans, and eligible spouses. The good news is borrowers can roll this fee into their loan amount rather than needing to pay it at closing (however, they will want to bear in mind that rolling the funding fee into their loan will increase their monthly payments).
STEP 13: Close on your VA loan.
Closing is often the most exciting day of the home-buying process. The borrower’s offer has been accepted, their lender has approved the loan, and the VA fee has been paid. Now, the property can legally transfer from the seller to the buyer. Closing on a VA loan is similar to closing on a conventional mortgage. Borrowers may have to cover certain closing costs and will need to show proof of homeowners insurance to the lender.
Finally, the buyer signs several documents (such as a deed transfer) to officially transfer the house into their name. Many sales contracts allow the new owner to get the keys and move in right away after closing.
STEP 14: Repay your loan balance and restore your VA entitlement.
Eligible borrowers use part of their VA entitlement after closing on their loan. A great aspect of the VA loan program, however, is that it’s for life. This means veterans can use the program to secure favorable mortgage terms as many times as they like.
The entitlement used on a loan is usually unavailable for future loans until the loan is repaid. If a borrower repays their mortgage loan balance, however, they free up entitlement money for another VA loan. For example, a veteran may decide to sell their current VA-loan-funded house and buy another through the program. When they sell the home, they pay off the remaining mortgage balance with the home sale proceeds. Their entitlement money is again available for their next purchase.
The VA loan program is one of the easiest ways for veterans to purchase a new home. Using a VA loan helps veterans save on closing costs and can provide a lower interest rate. It also usually eliminates the need for a down payment, which can be a huge draw for buyers without substantial savings, allowing them to get on the property ladder sooner. Veterans wondering, “How can you get a VA loan?” can follow these 14 simple steps for their next home purchase.
It’s recommended that borrowers check their eligibility before applying for VA loans and shop around among lenders. Even within the VA loan program, some lenders could offer more favorable terms—such as lower interest rates—than others.