Updated November 8, 2023
The Veterans Affairs (VA) home loan program provides eligible servicemembers, veterans, and surviving spouses the opportunity to become homeowners without the worry of a less-than-perfect credit history. These government-backed home loans are offered by approved, private lenders with the benefit of highly competitive interest rates and little to no down payment required.
Sound like an option for you? We’ll discuss the VA loan process, step by step, so you know exactly what to expect and if a VA home loan is right for you.
Step One: Learn the VA eligibility and qualifications
To get approved for a VA loan, you must meet standards set by the VA and your lender. The following is a list of the VA requirements and common financial guidelines.
- VA certificate of eligibility (COE) – Proof you meet the VA’s military criteria:
- 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
- Credit score – No minimum set by the VA; most lenders will require 620 or higher
- Debt-to-income ratio (DTI) – 41% or lower
- Proof of income – Documentation showing consistent income sources
- Down payment – As low as zero down
- VA minimum property requirements (MPRs) – Strict safety standards verified by a VA-backed appraiser
- Primary residence requirement – VA IRRRLs are offered on second homes and investment properties, not offered on purchase or cash-out refinances
The U.S. Department of Veterans Affairs is a great place to review the eligibility requirements in depth. You can also apply for your COE directly on their site.
Step Two: Choose a VA-approved mortgage lender
There’s more to picking a lender than finding the lowest rate. You’ll want someone who specializes in VA loans, has common values, and truly cares about your homebuying success. Many military families will find that a credit union checks all those boxes.
As you research, here are a few questions you should ask potential lenders:
- Are you a VA-approved lender?
- What type of loan is best for me?
- What costs can I expect when working with you?
Step Three: Get pre-qualified for a VA loan
Once you’ve selected your VA lender, or at least narrowed down the list, it’s time to get pre-qualified for a loan. You’ll need to understand how much home you can afford based upon your income, credit, VA entitlement, and other financial factors. While pre-qualification is not an official stamp of approval, it will set the parameters of how much home you can likely afford.
After your lender has confirmed the service requirements through the COE, the lender then completes a soft credit check, which doesn’t affect your credit score, to make an initial estimate. As soon as you find a property and are ready to make an offer, they’ll work with you on pre-approval, which requires more documentation regarding your finances and a hard credit check. A pre-approval shows sellers that you’re financially qualified as a buyer and serious about purchasing a home, giving you a leg-up in a competitive housing market.
Step Four: Work with an experienced VA real estate agent
Technically, you’re not required to use a real estate agent. However, they can be a valuable partner during the homebuying experience. When you interview potential agents, let them know you plan to use a VA loan. Make sure they have VA home loan experience so they can guide you through the process with confidence. They should only show you properties they believe meet the VA’s property standards.
When it comes time to make an offer, they’ll work on your behalf to negotiate the best possible deal – which may include the seller paying some of your closing costs. The VA even offers homebuyers protection from having to pay real estate agent commission fees.
Step Five: Complete your VA loan application
Congratulations! By this step in the process, you’ve found a home, your offer has been accepted, and you’re ready to march forward. At this point, your lender will ask for all of the required documentation required for a loan approval. Here are the most common documents required (some of which you may have already provided to get pre-approved):
- VA Certificate of Eligibility (COE)
- Government-issued ID
- Bank statements from the last two months
- Pay stubs from the last 30 days
- Tax returns – business and personal – from the last two years
- W-2s or 1099s for the past two years
- Retirement statements from the last two to three months
- Social security award letter
Additionally, at this point, you will be expected to provide:
- The property appraisal
- House contract
- Inspection documentation
- Title insurance evidence
Having your documents organized and ready will help underwriters work efficiently as they review your application. We’ve compiled some tips to help, but be prepared to answer questions or provide additional details if further clarification is needed.
Step Six: Schedule the home appraisal
The final step in VA loan qualification is the home appraisal, which is done after confirming both service and financial eligibility. The VA sets strict standards when it comes to property use and condition. Your lender will find a VA-approved home appraiser who will check the property to make sure it is safe and secure. The appraiser is different from a home inspector. VA minimum property requirements (MPRs) are in place to make sure your home is safe before moving in. They are safeguards to prevent you from buying a home that’s dangerous or in need of extensive repairs.
Any number of issues can slow down the loan process during this step, including property safety concerns and the need to renegotiate an offer due to an appraisal coming in lower than the amount you agreed to pay.
Step Seven: Review the loan estimate
Within three business days of receiving your application, your lender is required to provide a loan estimate. This three-page document details important figures including your anticipated down payment, interest rate, monthly payment, VA funding fee, and total closing costs.
How much is the VA funding fee?
While lower interest rates and the prospect of no down payment are very attractive, VA loans typically require a funding fee. A funding fee is a one-time payment and can be paid up front or rolled into the cost of the loan.
Here’s a quick overview to give you a better understanding of what to expect:
- If your down payment is less than 5%, your funding fee would be 2.15% of the loan.
- If your down payment is 5% or more, your funding fee would be 1.5% of the loan.
- If your down payment is 10% or more, your funding fee would be 1.25% of the loan.
Though the loan estimate is not an official approval or a final offer of rates and costs, it is a helpful document that gives a realistic view of what you’ll be responsible for paying if it moves forward. Take time to review the pages, ask questions, and compare choices if you’re still deciding between more than one lender. Now is the time to crunch the numbers and make sure you can afford the up-front costs and monthly payments.
Step Eight: Sign on the dotted line, pay your closing costs, and start moving
Once you’ve completed the COE, financial qualification, and home appraisal, you’ll know that both you and your property are qualified for a VA loan. Finally, you’ll be ready to close the deal and move in. This final step is when everything comes together — the appraisal checked out, your loan is approved, and the offer is set in stone. Now it’s time to make it official by signing on the dotted line and paying up-front costs.
A long list of fees due at closing can feel overwhelming. The good news: The VA protects you from certain costs like escrow fees, lock-in rate fees, and application fees. They also make it possible to reduce up-front expenses and avoid some closing costs altogether. That’s another reason to work with a lender and real estate agent with experience working with VA loans and borrowers.
After signing many legal documents — insurance, bank, and other financial information — you’ll get your keys, and the home is officially yours.
Those are all of the steps of the VA loan process. Whether you’re new to the homebuying experience, refinancing, or simply interested in finding your next home, it’s always important to speak with a loan specialist to understand if a VA loan is right for you. For a more in-depth review of the process, be sure to download our eBook.