VA loans help service members, their surviving spouses, and veterans become homeowners via loans from private lenders. The U.S. Department of Veterans Affairs guarantees a portion of the loan, which allows servicemembers to obtain homes with no down payment and a low-interest rate, among other benefits.
How to Qualify for a VA Loans
Veterans may qualify for a VA loan when they meet at least one of three standard criteria. Servicemembers must meet one of the following conditions.
- Served at least 90 days of active service during wartime
- Served at least 181 days of active service during peacetime
- Served more than six years with the National Guard or Reserves or at least 90 days under Title 32 with a minimum of 30 days served consecutively
When a veteran or service member meets one of these criteria, the VA will send a Certificate of Eligibility (COE), which is the official document that the lender needs to ensure an applicant is qualified for a VA-backed mortgage.
Different Types of VA Loans
The Veterans Administration offers several different types of VA loans. The most common is the VA purchase loan, which carries with it the benefits of a low-interest rate and no need for private mortgage insurance.
Similarly, the VA direct home loan offers the same benefits but is different from the traditional VA loan because the Veterans Administration acts as the service member's mortgage lender rather than a private mortgage company.
Another option is the VA cash-out refinance loan, which helps families who already own homes take equity (cash) from their homes to help pay for costs like credit card debt, home improvement projects, and medical debts. Service members can also pay for school with their VA cash-out refinance loans.
Service members who already own homes may also consider an Interest Rate Reduction Refinance Loan (IRRRL), which can help the family get a lower interest rate on an existing VA loan. Lower VA home loan rates help lower a veteran's monthly payments. An IRRRL is sometimes called a Streamline Refinance Loan.
Some individuals may qualify for the Native American Direct Loan (NADL) program, which may offer the best overall VA loan rates for those who are eligible. Veterans who are Native American or have a spouse who is Native American may receive a loan to build, buy, or improve a home on federal trust land. A NADL can also help with the refinancing of an existing home.
To qualify for a NADL, service members must belong to a nation with a Memorandum of Understanding (MOU) or agreement with the federal government. The service member or veteran must also have a VA home loan Certificate of Eligibility (COE) and meet the credit and income standards required to own a home.
Veterans who have permanent and total service-connected disabilities may qualify for a Specially Adapted Housing Grant, which helps veterans buy or build an adapted home. Veterans may also use the money to modify an existing home to accommodate their needs.
Examples of adapted homes include those with wheelchair-accessible ramps and doorways. In an adapted home, some veterans may have an easier time living independently. Qualifying service-connected disabilities include:
- The loss and/or use of more than one limb.
- Blindness in both eyes.
- Certain severe burns.
The Benefits of VA Home Loans
Not only do VA loans help service members and veterans obtain home loans at an interest rate that is usually lower than the standard rate, but the loans also come with reduced closing costs, which helps lower the overall cost of becoming a homeowner.
VA loans also don't require Private Mortgage Insurance (PMI), which helps lower the cost of paying for a house even more for veterans, service members, and their families. Anyone who receives a VA loan can also pay off their loan early with no prepayment penalties that lenders occasionally assess on mortgage loans.
The VA loan program is a lifetime benefit for those who serve their country, which means veterans can use the guaranty multiple times throughout their lives and enjoy low VA home loan interest rates.
Other Options for Veterans and Service members
Veterans and service members who already have VA loans may also qualify for additional programs designed to help veterans remain in their homes despite various difficulties. For example, the agency offers foreclosure avoidance assistance, which is financial counseling that may help a veteran prevent foreclosure, remain in their home, and preserve their VA mortgage rates.
Veterans or surviving spouses don't even need a VA home loan to qualify for financial counseling. Those who do have a VA loan can speak with the agency at any time where a VA loan technician will assist with financial counseling and work directly with the veteran's loan servicer.