VA Loan Guide: Requirements and How To Apply

Caring for soldiers and their families is an American tradition dating back to Colonial times — one that the Department of Veterans Affairs continues by guaranteeing affordable mortgages for qualified veterans looking to buy a home.

VA loans offer generous benefits: no minimum down payment or private mortgage insurance. The credit qualifications and other financial requirements also are more lenient, making them an attractive option for eligible borrowers.

What Is a VA Loan and How Does it Work?

VA loans are issued by private lenders and guaranteed by the Department of Veterans Affairs. If the borrower defaults on the loan, the VA guarantees repayment of a portion of the loan to limit the lender’s losses. The VA guarantee reduces lenders’ risk when issuing loans, allowing them to offer loans with more favorable terms to eligible service members, veterans, or their spouses.

Otherwise, VA loans are similar to conventional home loans. The lender provides money for the borrower to purchase a home, and the homebuyer repays that amount — plus interest — following an amortized schedule. Closing costs on VA loans are comparable to those for conventional loans, and must be paid in cash.

Loans are funded by the approving bank, credit union, or other type of lender. Borrowers make regular payments to the lender, as with other mortgages.

Funding for the program is part of Veterans Affairs’ annual budget. For 2023, the VA requested just over $300 billion from Congress. According to the 2023 budget submission, the VA’s home mortgage program has a portfolio of 4.1 million active loans.

But not every homebuyer — or veteran — qualifies, so taking advantage of these benefits requires learning the specifics of getting a VA home loan.

VA loans vs. traditional home loans

VA loans differ in significant ways from standard mortgages:

• While a conventional mortgage can be used to buy any type of property — including vacation or income properties — a VA loan can be used only for the borrower’s primary residence.
• The VA sets no minimum credit score requirement, but the private lenders who issue VA loans can do so. For conventional loans, most lenders require a credit score of at least 620.
• VA loans require no down payment, one of their most attractive features. With conventional loans, you must make a down payment of at least 3%. And if your down payment is less than 20% of the purchase price, lenders require you to pay for private mortgage insurance.

Our mortgage comparison tool can help you decide which loan type is best for you.

While VA loans come with fewer costs, they aren’t free. The VA requires borrowers to pay an upfront funding fee between 0.5% and 3.6% of the total loan amount. The rate is based on your down payment and whether you’ve ever had a VA loan. The fee can be paid either at closing or by adding to your loan amount. The VA allows buyers to ask for up to 4% of their loan in seller concessions, which are fees normally paid by the buyer that the seller agrees to pay. Examples include prepaid taxes and insurance, mortgage points, and the VA funding fee

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Who Can Get a VA Loan?

To qualify for a VA loan, borrowers need to have served in the military or be the surviving spouse of someone who served.

VA home loan benefits may be extended to active or discharged members of the U.S. Army, Navy, Air Force, Marine Corps, Coast Guard, and Space Force, or those who served as a commissioned officer with the Public Health Service, Environmental Science Services Administration, or National Oceanic and Atmospheric Administration. National Guard and Reserve members also may be eligible.

Obtaining a certificate of eligibility

To get a VA loan, borrowers need a certificate of eligibility from the Department of Veterans Affairs.

Veterans and service members on active duty must have anywhere from 90 days to 24 months of service, based on when they served, to get a certificate. National Guard and Reserve members need anywhere from 90 days to six years of service. There are additional exceptions for those who don’t meet these minimums. Full details can be found on the VA’s page on applying for a certificate of eligibility.

Veterans’ spouses may qualify for a certificate of eligibility if the veteran:

• Has been declared missing in action.
• Has been declared a prisoner of war.
• Died while in service or from a service-connected disability, and the spouse has not remarried.

Full eligibility details can be found on the VA’s page on home loan programs for surviving spouses.

VA loan disqualifications

Not everyone who has served in the military or is married to a veteran can qualify for a VA loan. The two principal ways that a veteran can be disqualified from getting a VA loan are:

• Failing to meet minimum service requirements. All veterans must serve a minimum amount of time on active duty to obtain a certificate of eligibility. This minimum varies depending on when the veteran served and the reason they were discharged.
• Being dishonorably discharged. Veterans with a dishonorable discharge cannot receive VA benefits, including a home loan.

There are several types of discharges from military service, some of which may pose an obstacle to getting a certificate of eligibility. Veterans may change their discharge status using a couple of different ways.

One option is to apply for a discharge upgrade. You fill out an application and submit it for review, and if it’s accepted, then you’ll be eligible for VA benefits.

Another option is to pursue a review of your character of discharge. The VA will examine your record to determine if your military service fits the definition of “honorable for VA purposes.” This process can take up to a year and requires you to provide documentation and find people willing to advocate for your case.

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Types of VA Loans

The VA offers five home loan programs.

VA purchase loan

This is the VA’s primary home loan program. The loan can be used to build a new home; improve, renovate, or upgrade an existing home; buy a single-family home; buy a condominium in a VA-approved project; or buy a manufactured home or lot.

Cash-out refinance

A mortgage refinance replaces your current home loan with a new one, usually with better terms. If qualified, you could refinance a non-VA loan into a VA-backed loan.

A cash-out refinance involves taking out a new VA loan based on the current value of your home, repaying your original loan, and keeping what’s left. The amount you borrow is repaid as part of your new loan. Many homeowners use a cash-out refinance to pay for major expenses or consolidate high-interest debts.

Interest rate reduction refinance loan

This loan, often known as an IRRRL, modifies your current VA loan with a reduced interest rate, lowering the monthly payment. Also known as a streamline refinance, this program cannot be used to refinance a non-VA loan.

VA renovation and home improvement loan

These loans are used to repair or improve an existing property. If qualified, you could take out one of these loans alongside a VA purchase loan, or for an existing property. Our mortgage refinance calculator can help you decide if this option is worth pursuing.

Native American Direct Loan

This program is unique in that it’s a loan directly from the VA, as opposed to a private loan guaranteed by the VA. The NADL program allows borrowers to buy, build, or improve a home on trust lands, such as a Native American reservation. Borrowers must be Native American or married to someone who is Native American.

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Comparing VA Loan Types

VA loans come in several forms, any of which could make sense depending on your homeownership goals. Here’s a brief comparison of VA loan types:

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VA Loan Requirements

VA loans are widely available to qualified veterans and their families, but approval isn’t automatic. Here are important VA loan requirements to consider before applying.

Property types and requirement

VA loans can only be used for homes, not land or investment properties. Single-family homes, condos, townhouses, and new construction loans are the most commonly approved. You also may find a loan for modular housing, but only when the home is physically secured to a foundation. Mobile homes and co-op properties aren’t eligible.

If you want to use a VA loan for new construction, there are some additional hoops to jump through, including working with a VA-approved builder, appraiser, and home inspector.

Occupancy requirements

When you sign the loan papers, you must certify that you intend to personally occupy the property as a primary residence. You’ll most likely need to move in within 60 days of the loan closing. If you’re on active duty or deployment, you’re considered to be occupying the property even if you’re not physically there.

Loan limits

The amount you can borrow varies based on several factors. Once you’ve received your certificate of eligibility, you’ll have to work within each lender’s specific limits. Those may be influenced by your credit history, income, and net worth. A mortgage calculator can help you determine your budget.

There’s technically no limit on how much you can borrow with a VA loan. If you borrow more than $144,000, the VA guarantees up to 25% of the home value to the lender. A county loan limit also caps the home value. Check with your lender if you’re considering a high-priced home, particularly if it’s expensive for the area in which you’re buying.

Closing costs

Buying a home requires a series of closing costs, including real estate agent fees as well as title insurance, appraisal, and government recording fees. Closing costs typically range between 2% and 5% of the purchase price. There’s also a VA funding fee of 0.5% to 3.6% of the loan value that needs to be paid.

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Is a VA Loan Right for You?

If you qualify, the generous terms of a VA loan could make it easier to get a mortgage and buy a home. You may be asking yourself, why would a qualified buyer not get a VA loan? Let’s break down the advantages, as well as some drawbacks.

Pros of VA loans

Here are some of the most notable benefits of getting a VA loan:

• No down payment. This could be a big advantage over standard home loans if you’re struggling to save for a down payment.
• No PMI. Private mortgage insurance typically is charged when borrowers put less than 20% down. VA loans don’t require PMI, regardless of the down payment amount.
• No loan limits. Unlike other government-backed loans, eligible borrowers with full entitlement have no limit on how much they can borrow with a VA loan. Full entitlement refers to borrowers who have never taken out a VA loan, have paid off a VA loan and sold the property, or have repaid a VA loan in full. However, remember that individual lenders still will determine how much you can borrow.
• Lower credit requirements. If you’ve filed for bankruptcy or gone through a foreclosure, you may qualify for a VA loan in as little as one or two years. The VA also has no credit score requirements, but the private lenders who extend the loans can set minimums.
• No prepayment penalty. You can repay your VA mortgage early without incurring a fee. Many conventional loans come with prepayment penalties, meaning you’re charged a fee if you repay all or part of your loan early.

Cons of VA loans

Here are some downsides to VA loans:

• No investment properties. VA loans can only be used to buy a primary residence.
• No fixer-uppers. “The VA has strict standards regarding the condition of properties because its loans are meant to acquire primary residences for veterans,” says Julie Aragon, a real estate agent and mortgage loan originator at Arbor Financing Group in Santa Monica, California. You can use a VA loan to renovate a home, but buying a run-down home to flip is prohibited.
• The VA funding fee. One charge specific to VA loans is the funding fee, which is a percentage of the total loan amount determined by the size of your down payment. If it’s less than 5% of the loan, the funding fee is 2.3%. With a down payment of 10% or more, the fee drops to 1.4%. You can avoid paying the funding fee if you meet certain requirements, such as receiving VA compensation for a disability related to service.
• Lender fees. Lenders may charge their own fees on top of the VA funding fee. Many lenders charge a flat fee — sometimes called a loan origination fee — of 1% of the loan amount.
• Seller objections. Sellers are sometimes hesitant about accepting offers funded by VA loans. “The VA process is longer than conventional loans, and the appraisals are very strict,” says Carolyn Riley, a real estate broker based in Garner, North Carolina. “Some sellers also have strong issues with the seller concessions rules. The VA allows the buyer to ask the seller to pay some of the costs associated with the loan. It can be a big turnoff for sellers.” 

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How To Get a VA Home Loan

The VA loan process consists of several steps. Prepare for plenty of paperwork from your lender and the VA as you move through the process. Staying organized and in close contact with your real estate agent or Realtor and your lender will help keep the process on track.

1. Review your finances

The first step when buying a home is to review and organize your finances.

Know your credit score

You’ll want to know what your credit history looks like, and your credit score. If there are any negative marks on your record, be sure to address them and correct them if they are inaccurate.

Calculate your debt-to-income ratio

You’ll also want a better picture of your debt-to-income ratio. This percentage is calculated by adding up your monthly debt obligations and dividing the total by your gross monthly income. You can use our free DTI ratio calculator to help with the math. The VA sets no limit on DTI ratios, but prefers one that’s no higher than 41%.

Other required documents

Your lender may ask for additional financial information, including bank and investment account statements, pay stubs, and tax returns for the most recent one to three years. Each lender has different requirements, and you could be asked for additional paperwork to support your application along the way.

2. Get your certificate of eligibility

The certificate of eligibility shows lenders that you’re eligible for a VA loan. It’s best to get your certificate of eligibility before you start shopping for a home and a lender.

3. Find a lender

Whether it’s a bank, credit union, or other mortgage lender, you’ll need to find one that offers VA loans, and double-check that any lender you consider is VA-approved.

You also should find out how much experience the lender has with VA loans. A lender that regularly handles VA loans will have a better understanding of the requirements and process than one that only deals occasionally with VA loans.

4. Consider VA loan preapproval

Mortgage preapproval is an important step when you buy a home. Getting VA loan preapproval lets real estate agents and sellers know you’re ready to buy, giving them an idea of how much house you can afford. Many sellers and real estate agents won’t work with buyers who aren’t preapproved.

The VA loan preapproval process is largely the same as for conventional mortgages. Lenders check your credit history, credit score, employment history, income, DTI ratio, assets, and liabilities. A preapproval letter usually has an expiration date of between 30 and 60 days.

5. Submit your mortgage application

Once you’ve found a home and settled on a lender, you must complete a mortgage application and submit documentation showing you’re eligible for a VA loan.

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VA Loan FAQ

Here are answers to some frequently asked questions about VA loans.

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The Bottom Line on VA Loans

VA loans are a competitive mortgage option for homebuyers who qualify. While a borrower must have some kind of connection to the military — as a veteran, an active-duty service member, or a surviving spouse — VA loans may give borrowers who meet those requirements a better chance of being able to afford a home.

Jason Steele and Eric Rosenberg contributed to the reporting of this article.