VA Home Loan basics: An earned benefit with unique advantages

Active homebuyers most often search for their new homes during the busy spring and summer months. Experienced Veteran homebuyers know they have a leg up on the process—their VA Home Loan Guaranty benefit. But what about those who’ve never used it?

Meet Army Reservists and new homeowners Brian and Amy. They expected the VA home loan process to include lots of government paperwork that would take a ton of time to complete, but they quickly learned that it was fairly simple—and came with an added benefit. The couple had been saving up for a down payment, but thanks to the VA Home Loan program, they were able to use the money they saved for the down payment and instead put it toward renovating their new home.

This is just one unique benefit of the VA home loan that makes it the product of choice for eligible Veterans, service members, National Guard and Reserve members, and surviving spouses.  

For Veterans thinking of starting the home-buying journey, VA wants to make it easy to understand the VA home loan process. Let’s start with the basics.

What is the VA Home Loan Guaranty?

Since 1944, VA loans have helped generations of Veterans and service members build stronger financial futures. As part of its mission to serve Veterans, VA Loan Guaranty Service helps Veterans buy, build, repair, retain or adapt a home for their personal occupancy.

The VA home loan program offers several advantages for Veterans:

• In most cases, no or limited down payment required by VA (lenders require a down payment in some cases).
• In most cases, no or limited loan limit if the Veteran has full entitlement and can meet the lender’s financial guidelines.
• No need for Private Mortgage Insurance (PMI).
• Limited closing costs and competitive interest rates compared to other loan programs.
• Your VA home loan is a lifetime benefit: You can use the VA loan guaranty multiple times (with adequate entitlement).

How does the VA loan guaranty work?

VA is not a lender. VA home loans are funded by private lenders, such as banks and mortgage companies. VA guarantees a portion of the loan, enabling the lender to provide a Veteran with more favorable terms. This means VA provides a guarantee to pay a percentage of the loan back to the lender should the borrower default. This allows lenders to offer VA home loans with favorable financing terms.

What’s the first step in the VA Loan process?

The first step is to apply for a VA home loan Certificate of Eligibility, or COE, to verify eligibility for the VA home loan benefit. Generally, mortgage lenders will assist Veterans with obtaining their COE online with just a few pieces of information, but Veterans may do it on their own by requesting their COE online, or by mail. The majority of COE applications are issued automatically online.

What is the maximum loan amount a Veteran can obtain without a down payment?

VA does not set a maximum loan limit if the reasonable value meets or exceeds the purchase price and the Veteran qualifies based on their credit history, assets and income. In these cases, no down payment is required by VA. This means eligible Veterans who qualify can obtain loans over $1 million without a down payment! VA does limit the maximum amount of guaranty available to Veterans who have unrestored entitlement, which means the lender may require a down payment.

VA loan types

• Purchase: Buy new construction or existing single-family homes, condominiums, manufactured homes and multi-unit 2-4 properties.
• IRRRL: The VA Interest Rate Reduction Refinancing Loan (IRRRL) is one of the best features of the program because they’re simple, low-cost refinance loans that don’t require income verification or an appraisal.
• Cashout: Allows qualified homeowners to refinance their mortgage and take out cash from their home’s equity. 
• Assumptions: For all VA home loans committed on or after March 1, 1988, Veterans may sell their home to someone who agrees to assume the original terms of the loan. 

What if a Veteran has an issue paying their mortgage?

VA is here for Veterans, even if they are having trouble making their home loan payments. We encourage any Veteran who is having problems with their mortgage—or their mortgage servicer—to work with the mortgage company directly or reach out to us for support by calling a VA home loan representative at 877-827-3702. 

Where to learn more?

The VA home loan is considered the product of choice for Veterans and gives them an opportunity for homeownership not offered to civilians. For more information, visit VA’s home loan website, and check out the VA Home Loan Guaranty Buyer’s Guide for all of the details to help make your homebuying dreams possible.