A VA home loan can help eligible Veterans, active-duty service members, certain National Guard and Reserve members, and some surviving spouses finance a home through a private lender with a guaranty from the Department of Veterans Affairs. The program can allow eligible borrowers to buy with no down payment and without monthly private mortgage insurance. Eligibility for the VA benefit does not guarantee loan approval, though. Borrowers still need to meet applicable credit, income, occupancy, appraisal, and lender requirements.
Key Takeaways
- A Certificate of Eligibility confirms that you meet the VA’s service-based eligibility requirements.
- The VA itself does not set a minimum credit score, but individual lenders may.
- Eligible borrowers with full entitlement generally do not have a VA loan limit, although lender approval and appraisal still matter.
- Many borrowers pay a one-time VA funding fee, while certain borrowers are exempt.
- VA eligibility generally comes from the borrower’s own qualifying service or qualifying surviving-spouse status, not a grandparent’s service.
How a VA Home Loan Works
A VA-backed home loan is made by a private lender. The VA guarantees a portion of the loan, which reduces some of the lender’s risk if the borrower defaults.
That guaranty helps support several features associated with the program, but the lender still decides whether the borrower qualifies for the mortgage and how much the borrower can afford.
What a VA Loan Can Be Used For
Eligible borrowers can use VA-backed purchase loans for qualifying homes that they intend to occupy. VA programs can also cover certain other purposes, including building a home and refinancing, subject to the requirements of the specific loan program.
For a purchase, the property must meet VA and lender requirements, and the transaction includes a VA appraisal.
No Down Payment Does Not Mean No Cash Needed
Many eligible borrowers can purchase without a down payment, but there may still be closing costs, prepaid expenses, and other costs due at closing. The amount needed depends on the loan, property, negotiated seller credits, funding-fee status, and lender charges.
Who May Be Eligible for a VA Home Loan?
VA loan eligibility is tied to qualifying military service, duty status, or certain surviving-spouse circumstances. The exact service requirement depends on when and how the person served.
Veterans and Active-Duty Service Members
Veterans and service members may qualify if they meet the applicable minimum service requirements and other VA eligibility rules. The VA reviews service history and duty status when determining eligibility for a Certificate of Eligibility.
Can I Get a VA Loan if My Grandpa Served?
Generally, a grandparent’s military service does not transfer VA home loan eligibility to a grandchild. VA home loan eligibility is based on the applicant’s own qualifying service or on specific surviving-spouse provisions. If you believe you qualify through another category, request a Certificate of Eligibility or check directly with the VA.
Some Surviving Spouses May Qualify
Certain surviving spouses of Veterans may be eligible for VA-backed home loan benefits. Eligibility depends on specific circumstances, and an eligible surviving spouse generally needs a Certificate of Eligibility before using the benefit.
Start With the Certificate of Eligibility
The Certificate of Eligibility, commonly called a COE, tells a lender that the VA has confirmed the borrower’s eligibility for the home loan benefit based on service history or another qualifying category. A COE does not guarantee mortgage approval. The lender still reviews the borrower’s finances and the property.
VA Loan Credit and Income Guidelines
VA eligibility and lender approval are two different steps. A borrower can be eligible for the VA benefit but still need to satisfy the lender’s underwriting requirements.
Is There a Minimum VA Credit Score?
The VA does not set a minimum credit score for VA-backed home loans. Individual lenders can set their own credit standards.
That means a borrower with a lower credit score should not assume that every VA lender will make the same decision. Comparing lenders can be useful because their requirements may differ.
What Else Does the Lender Review?
Lenders consider factors such as income, debts, assets, and credit history when deciding whether a borrower can afford the loan. A VA loan calculator can be useful for estimating payments, but it cannot determine final eligibility, approval, interest rate, closing costs, or the amount a lender will offer. Most VA loan calculators estimate monthly principal and interest payments, but they cannot determine eligibility, lender approval, funding fee exemptions, closing costs, or the final interest rate you’ll receive.
VA Loan Entitlement and Loan Limits
Entitlement is the amount of VA guaranty available to support a qualifying loan. It is not the same as the amount a borrower can borrow.
What Full Entitlement Means
Eligible borrowers with full entitlement generally do not have a VA-imposed loan limit. The lender still determines how much the borrower can afford, and the property’s appraised value can limit the loan amount. A borrower who has already used some entitlement may be affected by county conforming loan limits when determining how much can be borrowed without a down payment.
The VA Funding Fee and Closing Costs
Many VA borrowers pay a one-time funding fee. The amount can depend on the loan type, down payment, and whether the borrower has used the VA home loan benefit before. Certain borrowers are exempt from the funding fee. The fee can generally be paid at closing or financed into the loan, while other purchase-loan closing costs generally cannot simply be rolled into the VA loan.
No Monthly Private Mortgage Insurance
VA-backed loans do not require monthly private mortgage insurance or FHA-style mortgage insurance premiums. That is different from some other low-down-payment mortgage programs. Borrowers should still compare the full loan cost, including interest, the funding fee when applicable, lender charges, taxes, insurance, and other closing expenses.
Can a Non-Veteran Assume a VA Loan?
A VA-backed loan may be assumable by a qualified buyer, including a non-Veteran, if the assumption is approved and the applicable credit, income, loan, and servicer requirements are met. Assumption can affect the original borrower’s VA entitlement. A seller with a VA loan should speak with the loan servicer and the VA about the specific assumption and entitlement consequences before agreeing to a transaction.
VA Occupancy Requirements
VA purchase loans are intended for a home the eligible borrower will occupy as a primary residence. The borrower generally needs to certify an intention to occupy the property under VA guidelines. This makes a standard VA purchase loan different from financing designed specifically for a vacation home or investment property.
Frequently Asked Questions
Can I get a VA loan with low credit score?
Yes, low credit score VA loans are available, but subject to approval. The VA does not set a minimum credit score, but individual lenders can apply their own requirements. Approval can also depend on income, debts, credit history, and other underwriting factors.
Do VA loans always require no down payment?
Eligible borrowers with sufficient entitlement can often buy without a down payment, but circumstances vary. Borrowers with remaining rather than full entitlement may need a down payment for some loan amounts.
Do Reservists Get VA Home Loan Benefits?
Some National Guard and Reserve members can qualify for VA home loan benefits. Eligibility depends on service history and the applicable requirements, so the Certificate of Eligibility is the best way to confirm whether the VA recognizes the borrower as eligible.
Using a VA Loan to Buy a Home
If you are considering a VA home loan, start by confirming eligibility and understanding your entitlement. Then speak with a lender that handles VA loans about qualification, costs, and the steps involved in your purchase.
A local REMAX agent can help you search for homes and manage the real estate side of the purchase while your lender and the VA address loan-specific eligibility and financing requirements.
