Veterans or active duty personnel looking for a home have the option of using a VA loan for financing. These types of mortgages, which are guaranteed by the federal government and available through lenders around the U.S., tend to offer attractive fixed-rate loans with no (or little) money down.

Understanding how a VA loan works and how to get one can help borrowers unlock the loan program’s unique benefits. Let’s take a look at how to get a VA home loan.

How does a VA loan work?

VA loans are funded by private lenders, but they’re partially backed by the Department of Veterans Affairs (VA). There are limitations on how much the VA can guarantee — also called “entitlements.”

Qualifying borrowers can take out a VA loan for their primary residence with no- to low-down-payment loans. There are also more lax income and credit requirements, helping veterans become homeowners.

The following people are generally eligible for a VA loan:

  • Service members who have served a minimum period on active duty
  • Veterans who’ve met the requirements for length of service
  • Surviving spouses of deceased veterans
  • National Guard and Reservists members

VA loan requirements

In addition to the criteria above, borrowers need to meet certain VA loan eligibility requirements to be approved. For one, the home needs to be used as a primary residence and occupied within 60 days after closing.

Next, applicants must demonstrate that they have sufficient income and an acceptable debt-to-income ratio (DTI). While the VA doesn’t set a maximum DTI, individual lenders — following their own guidelines — will assess a borrower’s DTI to make sure that they can cover their monthly payments while also repaying their debt.

Similarly, there’s technically no minimum credit score required for getting a VA loan, but again, lenders will review an applicant’s complete credit profile according to their own criteria. In general, most will expect to see a credit score of 620 or higher.

Finally, there’s no cap on the amount you can borrow (loan limits were eliminated in 2020), assuming that a borrower has a full VA loan entitlement. However, lenders will use factors like credit history and income to determine an appropriate loan size for a particular applicant.

Assuming that borrowers have met all of these requirements, they will receive a VA Certificate of Eligibility (COE), which lets lenders know that they’re qualified for a VA loan. With a COE, borrowers can actually begin applying for a VA loan application.

Steps to get a VA home loan

Here’s what a typical VA home loan process looks like:

1. Shop around for a VA-approved lender

Find a lender that participates in the VA loan program. A loan officer may be able to help you identify the types of documents needed and what size loan you can qualify for. It’s a good idea to shop around since, even though they’re all VA loans, deals offered by lenders can differ by interest rate, closing costs and discount points.

2. Obtain a Certificate of Eligibility

You need a COE before you can get preapproved for a VA mortgage, since it shows that you meet the initial eligibility criteria for the loan. To get a COE, check the eBenefits portal on the website or contact the VA for help. Borrowers may also be able to apply through their lender.

Some documents that you may need to provide to obtain the COE include:
  • Driver’s license or other government-issued ID
  • Recent financial information, including W-2s, pay stubs and bank statements
  • For active duty members, a signed statement of service
  • For veterans, discharge or separation papers (also known as form DD214)
  • For surviving spouses, a marriage certificate or license

3. Get preapproved for a mortgage

Getting preapproved for a mortgage shows home sellers you’re serious about purchasing a home and that banks deem you creditworthy to borrow money from them. It’s a statement or letter indicating how much, in principle, they will lend you. It’s not a guarantee of the mortgage — for that, you need to present a specific property for their appraisal and possibly additional documentation — but it’s an important first step, and many sellers require it before they’ll even consider your offer.

4. Find a home

Find a real estate agent who understands VA loans; better still if this person specializes in helping members of the military. Veteran-friendly agents can help you understand what to look for in terms of maximizing your benefits.

5. Sign a purchase and sale agreement

Your agent’s job is to help you craft a strong offer and formulate a sound negotiation strategy.

Once you’ve got an accepted offer and hammered out the details, you’ll sign a purchase and sale agreement with the seller. Don’t forget to ask about contingencies that you’ll want included in this contract: These can include how long you have to secure financing, the amount of earnest money you’ll need and the right to have a home inspection. It can also include sellers paying for some or all of the VA closing costs.

6. Go through a VA home appraisal and inspection

A VA-approved appraiser will determine the value of the home. This person will also help you assess whether a property can meet the VA’s property condition requirements, or Minimum Property Requirements.

This is also the stage where you’ll commission a home inspection if that was agreed upon in the purchase and sale agreement. In general, you shouldn’t skip this step. You’ll be able to get to know your property better and back out if you can’t get the seller to agree to make certain repairs before closing.

7. Complete the mortgage underwriting process

Your bank or lender’s underwriters will need additional documentation to evaluate your eligibility for a loan. Documents you might need to submit include proof of income, assets and other types of financial documents. If your information checks out, you’ll be issued what’s called a “clear to close” notice.

8. Close on your new home

The closing step is where you’ll sign documents that you understand and agree to the terms of your loan. Before your scheduled loan closing, you’ll receive a document called a closing statement, where you’ll be able to see a breakdown of your final closing costs.

Typical costs may include a funding fee, which varies from 1.4 percent to 3.6 percent of the loan amount. Usually, the higher your down payment, the lower the fee. There are also exceptions, such as ones related to disabilities or death.

A day or so before signing, you can also do a final walkthrough of the property. Once you sign all the closing documents, including the purchase agreement, you’ll receive the keys to your new house.

9. File your certificate

After closing, the VA will return your Certificate of Eligibility with a note stating that you have used (all or part) of your VA mortgage loan entitlement. Qualified borrowers can use their eligibility more than once to obtain a loan on a new owner-occupied home.

As with subsequent refinancing, subsequent mortgage loans carry higher funding fees, although those fees can be reduced with a higher down payment.

VA loan process vs other loan types

The process to get a VA loan can take longer than that of conventional loans since there are additional documentation requirements as part of the appraisal and inspection process. However, borrowers who qualify for a VA loan will get more favorable terms than they would with a conventional mortgage or FHA loan, which can save thousands of dollars throughout the lifetime of the loan.

Borrowers can take certain steps to help speed VA loan processing, such as getting a Certificate of Eligibility before signing a purchase and sale agreement and compiling other necessary documents during the underwriting process.