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How Does a VA Loan Work?

What you'll learn: The basic steps to getting your home with a VA loan


What is a VA loan?

Before we dive into the process of how VA loans work, it’s important to understand exactly what a VA loan is. A VA loan is a mortgage loan provided by private lenders that is partially backed or guaranteed by the U.S. Department of Veterans Affairs (VA). Because of this, VA loans offer highly competitive interest rates with little to no down payment required.

How do VA loans work?

VA loans are an attractive alternative to conventional home loans for many reasons. Since VA loans are backed or guaranteed by the VA, it provides lenders — like PenFed — the ability to provide benefits such as no required down payment, lower interest rates, and terms to borrowers.

Buying a home with a VA Loan is similar to that of a conventional mortgage, but there are some unique differences you should be aware of. Here’s a general guideline of the process:

How do I get a VA loan?

  1. Get prequalified. Once you’ve determined that you’re ready to purchase a home and you feel financially prepared, you’ll need to understand how much home you can afford based upon your income, credit, VA entitlement, and other financial factors.
  2. Discover VA loan eligibility requirements. The U.S. Department of Veterans Affairs is a great place to start for determining VA loan eligibility requirements. On their site, there is a chart addressing service requirements for veterans and service members on active duty. You can also find information on the service requirements for the National Guard and Reserve members. Here are a few general guidelines:

    • Any veteran who served after August 2, 1990, is eligible if they served for 24 continuous months.
    • Anyone on current active duty is eligible after 90 continuous days of service.
    • National Guard or Reservists who served after August 2, 1990, is eligible after 90 days of active-duty service.
  3. Find a home and make an offer. During the home search process, it’s important to share with your real estate agent that you will be using a VA loan and whether or not you’ve been preapproved. This will provide you with the best leverage during your home search and negotiation. Finding a real estate agent that is familiar with VA loans is always a plus because the process can be somewhat different than the process with conventional loans.
  4. Get a VA appraisal and start the underwriting process. A VA appraisal is different from a home inspection. During a VA appraisal, the home is evaluated to ensure that it meets the specific VA requirements for fair market value and minimum property requirements.

    During the underwriting process, your financial documents will be reviewed for your income and any other documents related to securing the VA loan. This can often be a back-and-forth process because underwriters may ask for additional information or supporting documents. This is to ensure that everything you provide will help provide a strong financial basis to obtain the VA loan.
  1. Close on your home. The closing process is an exciting time. After signing many legal documents — insurance, bank, and other financial information — you’ll get your keys, and the home is officially yours.

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Rates starting at % (APR %)¹


Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5


Rates as Low as % APR with flexible use of funds

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

VA Disclosures

1Rates are updated daily at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on discount point, which equals percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $450,000; loan-to-value ratio of 95%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.