5 Steps to Getting a VA Loan

Millions of veterans and active military members are eligible for what’s arguably the most powerful mortgage option on the market. VA loans feature $0 down payment, no mortgage insurance and more flexible and forgiving requirements.

To be sure, VA loans aren’t the answer for every veteran. But they continue to make a huge difference, especially for those who might otherwise struggle to land a home loan.

Here’s a look at five basic steps to getting a VA home loan.

1. Getting Your Credit in Order

The first thing you want to do is make an effort to understand and improve your credit. You can get your free credit report summary on Credit.com every 30 days. When shopping for home loans, it can help create realistic expectations and ensure you get the best deal possible.

The Department of Veterans Affairs doesn’t set a credit score requirement for this program, but the government also isn’t making the loan. Instead, the VA insures – or guarantees – a portion of each loan for the lender. Because lenders assume most of the risk, they can add guidelines, or “overlays,” such as a minimum FICO score.

Different lenders can have different credit cutoffs, but a 620 FICO score (on a scale of 300 to 850) is fairly representative. Generally, that’s considered just “fair” credit, which is another big benefit to homebuyers.

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2. Determining Your Eligibility

Eligibility doesn’t guarantee you a loan, but you also can’t get one unless you meet the basic service requirements for a VA Loan. There are time-in-service requirements that cover wartime and peacetime for regular military, National Guard and Reserves.

Generally, you may be eligible if you served:

90 consecutive days on active duty during wartime
181 consecutive days on active duty during peacetime
6 years in the National Guard or Reserves, or
You’re the surviving spouse of a veteran who died in the line of duty or of a service-connected disability

The only way to be sure you’re eligible is to get a copy of your Certificate of Eligibility (COE). You can try the VA’s eBenefits portal or even fill out a form and send away for it in the mail.

Lenders can often obtain this document for you, too. In fact, you don’t need your COE in hand start this process. Many lenders will pull your COE after they’ve prequalified you, so don’t let uncertainty about your eligibility stop you from seeing what’s possible.

3. Finding a Lender

Loan preapproval is key, no matter the loan type. It gives you a clear sense of your purchasing power and shows real estate agents and sellers you’re a solid contender.

You’ll need to supply paystubs, bank statements and other documentation to help lenders verify your eligibility and ability to afford the loan. VA buyers need to meet requirements for debt-to-income ratio, discretionary income and more, although many of the guidelines are more lenient than other loan types.

More than 1,000 banks and lenders make at least one VA loan a year. There’s no recommended list or national directory, but this is a specialized loan product, and some lenders know VA loans way better than others.

Some buyers gravitate toward companies with more VA expertise. Others focus more on rates and costs. There’s no right answer. But loan officers and real estate agents who close a lot of these loans may be better equipped to navigate guidelines and troubleshoot.

4. Purchase and Processing

This loan program is about getting military buyers into primary residences, not vacation homes or purely investment properties. Most buyers purchase a single-family residence, although condos, townhomes, new construction and manufactured housing are all possible uses. (This calculator can help you estimate how much house you can afford.)

Once you’re under contract, the lender will order a VA appraisal, which assesses the property’s value and condition. Many buyers (wisely) choose to start with a home inspection – unlike the appraisal, a home inspection isn’t required, but it’s a much more detailed look at the property.

If you’re happy with the inspection, then you can move on to the mandatory appraisal. VA appraisers look at recent comparable home sales to estimate the property’s value. They also assess the property’s overall condition and recommend any obvious repairs needed to satisfy the VA’s Minimum Property Requirements. These issues usually need to be fixed before the loan can close.

Most VA appraisals come back within about 10 business days. A lender’s staff appraisal reviewer goes over the appraisal report and issues the final Notice of Value for the property.

5. Underwriting and Closing

Your lending team will submit your file to the lender’s underwriting staff for a detailed review. Files rarely sail through the first time without requests for additional documents, like pay stubs, tax returns or a “letter of explanation” regarding a particular issue.

The faster you tackle these underwriting “conditions,” the faster you move toward having the loan cleared to close. Lenders will verify your credit, your employment and other information as closing day nears.

That means big changes are not your friend during the loan process – avoid taking on new debt, changing jobs or moving money around your bank accounts until after your loan closes and funds.