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  • Cal Crismore

VA Loan: A Complete Guide

Veterans, service members and qualifying spouses can all get a low-cost mortgage by taking advantage of a VA loan — one of the many benefits of military service. Even if your credit score isn't perfect, you may still be eligible for this type of loan.

Current members of the military or veterans may be eligible for a VA loan. This article will provide an overview of these government-backed loans, including interest rates, qualification requirements and benefits. If you are a disabled veteran, there are additional benefits available through VA loans so be sure to read on.

What Is A VA Loan?

A VA loan is a government loan that has the U.S. Department of Veterans Affairs (VA) as its backer.

If you're a veteran, the VA offers specific guarantees to private lenders that make handling your VA loan much easier. Thanks to these guarantees, many veterans are able to qualify for loans with no down payment and more lenient requirements.

How Does A VA Home Loan Work?

There are several types of VA loans, and they pose less of a risk to lenders because they’re backed by the US government. The Department of Veterans Affairs (VA) does not issue these loans directly, but they do determine who qualifies for one. Several different kinds of lenders can issue VA loans.

Because VA mortgages don't correspond to the guidelines of Fannie Mae and Freddie Mac, they're considered non-conforming loans. Although this designation might seem daunting, it actually allows for more flexibility in qualification because of the leniency surrounding credit score requirements. In addition, VA mortgages boast a host of advantages over their conventional loan counterparts: lower interest rates across the board, more relaxed borrowing qualifications and no down payment required upon closing chief among them. Plus –and this is a big one-- you'll never have to worry about monthly mortgage insurance premiums with a VA loan!

Who Qualifies For A VA Loan?

If you're eligible, VA loans are an attractive option because they usually don't require a down payment. They also have lower interest rates than many other types of mortgage loans you can get for similar terms. Plus, there is no monthly mortgage insurance with a VA loan.

The VA loan program has more lenient credit requirements than most other mortgage programs, making it easier to qualify for a loan even if you have poor credit or a small down payment.

You must meet one or more of the following criteria to qualify for a VA loan:

  • You’ve served 181 days of active service during peacetime.

  • You’ve served 90 consecutive days of active service during wartime.

  • You’ve served more than 6 years of service with the National Guard or Reserves or 90 days under Title 32 with at least 30 of those days being consecutive.

  • If you are the spouse of a service member who lost their life in combat or as the result of a disability connected to their service, then you may be eligible for a VA loan. There are some requirements that must be met, such as not being remarried (with some exceptions), but if you qualify thenVA loans can be an excellent way to finance your home.

What Is A Certificate of Eligibility (COE)?

A COE, or Certificate of Eligibility, is necessary to apply for a VA home loan. You'll need to show proof of service in order to get your COE--but the kind of proof you submit depends on your status as an active-duty military member, veteran, surviving spouse, etc.

Documents Needed

Depending on your status, there are several different forms you’ll need to include with your mortgage application in order to qualify.


In order to verify your military discharge, veterans must submit a DD Form 214. This certificate can be easily requested online by utilizing the eVetRecs filing system.

Active-Duty Service Members

For VA loan applications, you'll need a statement of service signed by your personnel officer, or an adjunct or unit commander if you're active-duty military. The statement of service must include your full legal name and Social Security number along with your birthdate.

In order to apply for a COE, you must documentation from your superior that includes the date you entered service, information about any breaks or discharges from service, and the name of the commander providing this information.

Current Or Former Activated National Guard Member

National Guard members must provide a copy of their DD 214 form.

All of the following documents are required if you want to qualify and have at least 90 days of active service:

  • Your DD214 that 32 USC sections 316, 502, 503, 504, or 505 activation is shown on

  • An annual point statement

  • Your DD220 with the corresponding orders

Current Member Of The National Guard Or Reserve Who Hasn’t Been Activated

A statement of service signed by your commanding officer is required. The requirements for this are the same as they are for active-duty service members.

Discharged Member Of The National Guard Who Wasn’t Activated

Guard members who are discharged must have NGB Form 22, which is a Report of Separation and Record of Service. You will also need to provide NGB Form 23 as well as proof that you meet the character requirements for service.

Because National Guard units are run by individual states, there is no central set of records. Therefore, if you want to obtain your COE, you need to get in touch with the National Guard Adjutant General’s Office for the state in which you served and request your NGB Form 22 and 23.

Discharged Member Of The Selected Reserve Who Wasn’t Activated

You must have a copy of your annual Retirement Points Statement if you’re a discharged member of the Selected Reserve. You also need proof of honorable service and discharge.

Surviving Spouses

Surviving spouses who do not get dependency benefits can get a COE if they have their spouse’s DD Form 214, their marriage license and their spouse’s death certificate. You also need to print and complete VA form 21P-534-ARE, which is available on the VA benefits website.

Surviving spouses who receive dependency benefits need to print and complete VA form 26-1817. You can download the form for free from the VA benefits website.

Once you’ve got your evidence, you have a few options to apply for your COE. You can apply online through the VA’s eBenefits website. You can also mail your documents and a completed VA Form 26-1880.

Additional VA Loan Eligibility Requirements

Once you’ve verified that you meet the service requirements for a VA loan, you need your income, assets and credit to check out, as well as the property you’re buying. Requirements may also vary for any loans your lender considers a VA jumbo loan.

Property Type

VA loans are not only for single-family homes. You can also use them on condos and manufactured homes, but keep in mind that not all VA lenders will finance these property types.

According to VA loan occupancy requirements, you must establish the property bought as your primary residence within 60 days of purchase. You can't use a VA loan for a vacation or investment property; however, if the eligible member uses it as their primary residence ,then they can buy a one-to-four family home.

Credit Score

VA loans don't have a minimum credit score, but every lender has their own standards. Rocket Mortgage's median credit score for VA loan applicants is 580. If you want to cash out 100% of your home equity, you'll need at least a 620 credit score.


The VA does not put a limit on your debt-to-income ratio, though the lender you go through might. Your DTI (debt-to-income ratio) is how much of your monthly income goes towards paying back debt. It's evaluated by the lender when they're considering whether or not you can pay back the loan. With Rocket Mortgage, maximum DTI often varies based on credit score and down payment/equity amount.

VA Loan Limit

The Department of Veterans Affairs (VA) doesn't usually place a ceiling on how much you can take out in a loan, with the rare exception of entitlement that's been strained by other borrowing. In most cases when a limit does apply to a VA loan, it is calculated using conventional loans as the baseline. For example, in 2022 the minimum amount for contiguous U.S. states will be $647,200 . Also , banks typically use these same boundaries for what they consider "jumbo" loans from veterans.

There are higher limits for more expensive areas. If you need a loan above that limit, you can investigate a VA jumbo loan. These loans don't require a down payment and may have lower interest rates than regular jumbo loans.

Down Payment And Assets

Few loan options don't require a down payment, but VA loans are one of them. Your lender may have additional requirements if you're looking to take out a no-down-payment VA loan.

For example, if you're putting down less than 10%, they may require that you have a higher credit score. The requirement to purchase a home with a VA loan through Rocket Mortgage with no down payment is still a median of 580 for any loan that falls within conventional limits.

Although "no down payment" may sound like there are no fees associated, that's not the case. There are still some other costs even when you're putting 0% down. Here are a few of them:

Funding Fee

The VA funding fee is a charge assessed to most people who get a VA loan. The VA funding fee generally spans from 1.4% – 3.6% of your loan amount, though if you had a VA loan in the past and are now doing a so-called "Streamline," then the fee is 0.5%.

The price you'll pay for the fee is decided by a few factors, such as the type of service, size of your down payment or equity, and whether it’s your first time getting a VA loan. Also, if you're a surviving spouse, veteran receiving disability benefits or active-duty Purple Heart recipient ,you are exempt from funding fees.

Don't freak out if you don't have the money right now. In many cases, you can include the VA funding fee in your mortgage plan.

Reserve Funds

Usually, you'll need to have some extra money saved up that you're not using for loan-related costs. This makes sure that once your loan closes,you can still make payments each month. The amount of funds you'll need left over is based on the cost of your mortgage payment every month, which includes principal and interest rates, as well as taxes and insurance. Although it's not always a requirement, typically being able to show reserves equal to 2 months' worth of mortgage payments is viewed favorably.

VA Loan Benefits

There are several advantages that VA loans have over conventional mortgages. A few of these benefits include the possibility of lower interest rates, no down payment requirement in some cases, no mortgage insurance, easier credit requirements, and extra benefits for disabled veterans.

Lower Rates

VA loans are more secure for lenders and investors because they are backed by the government, leading to typically lower interest rates than conventional loans- especially for borrowers who have had credit issues in the past.

No Down Payment

For those of you finalizing your home-buying budgets, don't forget to factor in a down payment. But if you're eligible for a VA loan, no problem! You can Kiss that pesky down payment goodbye because the Department of Veterans Affairs has got your back.

100% Loan To Equity

You can refinance your VA loan without having any equity in most cases, or even if you owe more on your home than it's currently worth. With a VA Streamline loan, you're allowed to refinance up to 120% of your home's value for changing your term or lowering your rate.

No Private Mortgage Insurance (PMI)

len You don't have to pay PMI with a VA loan. Mortgage insurance is required on conventional loans when you don't put down 20%. Without having this extra fee, you could save 0.1 – 2% of your loan annually until you've reached the 20% equity mark.

Lenient Borrowing Requirements

VA loans allow you to qualify for a mortgage with a higher debt-to-income ratio than any other program from one of the major investors. If your credit score is at least 620, the DTI requirements to qualify can depend on factors like your credit score and down payment amount.

If your score is above 580 but below 620, no more than 38% of your gross monthly income can go towards your mortgage payment. Also, your total DTI should not exceed 45%.

One of the key advantages of a VA loan is that you can access 100% of your equity in a cash-out refinance, which is not possible with other refinancing options. Rocket Mortgage requires a credit score of at least 620 to do this; if your credit score is lower than 580, you can still take out up to 90% of your home equity.

Additional Benefits For Disabled Veterans

In addition to the array of benefits accessible to all veterans, disabled veterans have unique opportunities available to them as well.

Exemption From Funding Fees

Disabled veterans are exempted from the VA funding fee, so they don’t have to pay the VA funding fee during closing. To qualify for the exemption, you must currently receive some form of disability benefits. Your level of disability is irrelevant.

This exemption can save veterans or their surviving spouse thousands of dollars. For example, if you buy a home worth $200,000, you might pay as much as $2,800 – $7,200 in VA funding fees when you close. Disabled veterans can avoid this fee.

Access To Specially Adapted Housing (SAH) Grants

If you have a disability that limits your mobility or sight, you might be eligible for a SAH grant.

SAH grants are specifically for construction and modifications to disabled individuals' homes. This can include designing a new home to fit their needs, modifying an existing home, or even paying the balance of an adapted home that was already purchased without VA grant assistance.

If you qualify, in 2022 you could be given a grant of $101,754 which can be used up to six times. As long as your disability qualifies, the money doesn't need to be paid back since it is a grant and not a loan.

Access the Special Housing Adaptation (SHA) Grant

There are two types of grants available--the SHA grant and the SAH grant. The amount of money you receive from the government may depend on how badly injured you are and how many other people have also requested a grant. If you qualify for the SHA Grant, then you may be eligible to receive up to $20,387 dollars in 2022. Also, keep in mind that these funds can be accessed six times before they run out completely.

Access To Other Adaptation Grants

Adapting your residence to better suit your needs can be expensive, especially if you're a disabled veteran. Luckily, the government offers TRA grants which will cover costs associated with adding modifications to make it easier for those with mobility-related disabilities to navigate their homes (if living with family). Even better? You don't need to pay back this grant like some others, making it a powerful tool for veterans in many different situations.

Property Tax Exemption

Your property taxes go towards sustaining your local library, fire department, and other development projects. If you're a disabled veteran, you may be eligible for an exemption that lower the amount of property taxes you have to pay.

Different states have different property tax exemption rules for veterans, so it's best to check with your local VA office to see which exemptions you qualify for. Some states exempt all veterans from property taxes, while others only extend this benefit to those who are receiving disability payments. In some instances, disabled veterans are entitled to a 100% Property Tax Exemption.

How To Apply For A VA Loan in 6 Simple Steps

If you're a veteran, here are six steps to take into consideration when applying for a VA loan. The process is similar to applying for any other mortgage.

1. Certificate Of Eligibility (COE)

In order to apply for your VA loan, you must be able to provide documentation of your military service. Tell your lender you need your certificate of eligibility early in the process so they can help you get it.

2. Approval

If you're thinking of buying a home, get pre-approved for a mortgage as soon as possible. Pre-approval will give you an idea of how much you can afford to spend on a house. In addition, when you make an offer on a property, the seller is more likely to take your offer seriously if they see that you have already been pre-approved for financing.

3. Shop For A House

If you're looking to buy a house using a VA loan, be aware that the property must meet the Veterans Affairs' Minimum Property Requirements. These requirements exist to ensure that the home is safe and inhabitable, and can differ depending on location.

4. Purchase Offer

After you've found a home you like and is in your budget, make an offer to the seller. They may accept, decline or provide a counteroffer. If both parties agree on a price, then drawing up a sales contract with the help of a real estate agent or attorney would be the next step.

5. VA Appraisal And Underwriting

Before you can qualify for a VA loan, underwriters from your lender will assess your finances. The VA will also require an appraisal that meets their standards, which are usually stricter than those of conventional loans. To make sure the home is up to par, the appraiser during a VA appraisal will check if it meets the VA’s MPRs, is sanitary and structurally sound and doesn't need any major repairs before being move-in ready.

6. Close On Your New Home

After the VA appraiser deems your new home acceptable, you're ready to sign for your loan, get the keys and officially start calling it yours.

Is A VA Loan Right For You?

The VA loan is an excellent benefit obtained by our military. With this, if you qualify, you get a great interest rate with 0 money down; meaning homeownership can be more affordable in general.

Avance Group; Your Local Mortgage Broker

If you're thinking about purchasing your home in New Mexico and are eligible for a VA Loan, Avance Group is a local mortgage broker that can help you understand your loan options and finance your dream home! Call us today at 817.524.6655 to get started!

Thank you for your service.


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