Benefits of a VA Home Loan

  • No down payment as long as the sale price does not exceed the appraised value
  • Loan-to-value ratio of 100%
  • Back-end debt-to-income ratio of 41 percent or more under certain circumstances
  • No private mortgage insurance
  • Limits on closing costs, which may be paid by the seller
  • No penalty for early payoff
  • Loan is assumable by another qualified veteran borrower
  • May apply for a new loan two years or sooner after a bankruptcy

Steps in the VA Home Loan Process

  1. Determine eligibility and entitlement
    Obtain a Certificate of Eligibility and proof of service.
  2. Qualify for the VA home loan
    Prequalification can speed up the approval process. Buyers should look for lenders who welcome military borrowers and know VA financing procedures. It pays to compare loan costs and terms.
  3. Find the right home, make an offer, sign a sales contract
    The home must be a primary residence, single-family, condo, or maximum 4-unit multifamily (owner must occupy one unit). Manufactured homes (mobile homes) qualify. No vacation homes, businesses, or farms.
  4. Arrange home inspections
    The property must be safe, structurally sound, and have functioning mechanical systems. The buyer should accompany the inspector. Not required by the VA.
  5. Request a property appraisal
    The VA Regional Office assigns an appraiser. The appraiser may or may not know the local market. If the appraised value is less than the loan amount, the borrower can make up the difference in cash or negotiate new price with the seller.
  6. Obtain homeowner’s insurance
    Like conventional loans, homeowner’s insurance is a requirement for closing escrow.
  7. Pay fees and closing costs
    The seller may provide concessions up to 4% of the property’s value, including the funding fee, and pay closing costs.
  8. Close the sale
    The buyer pays the VA funding fee and lender’s origination fee or itemized expenses. The real estate professional’s commission must be paid only by the seller.
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