Gone are the days when Veterans and service members spent all their lives in military barracks. Thanks to VA loans, you can now get financial assistance to buy your dream home without paying a down payment. Through the U.S. Department of Veteran Affairs, the government has made it easy for you to buy property anywhere in the country without stringent requirements.
From applying to securing the loan, the entire process is smooth and seamless, giving you the peace of mind you deserve as a reward for your service to the country.
So, what’s this zero-down payment loan all about? Well, here’s a breakdown of everything you need to know about VA loans and how you can use them to become a homeowner in the coming days!
Are you a Hometown Hero? Find out your eligibility for the Hometown Heroes Loan Program in Walton County, Florida.
What Are VA Loans?
A VA loan is a government-insured zero down payment home financing option exclusive to Veterans, active military personnel, and their eligible spouses. The primary objective of this mortgage is to help retired, active-duty service members buy homes without going through the tedious and sometimes time-consuming process of securing a regular loan.
VA loans focus on cushioning Veterans and active service members from the economic challenges involved when buying a home by making the entire process as seamless and transparent as possible. It is a tremendous financial lifeline for eligible borrowers since you don’t even have to place a down payment, and there are no hidden charges.
Unlike a traditional mortgage, a VA loan is comparatively one of the most flexible home financing options available right now. After all, qualifying is easy, and it has highly competitive interest rates than any other home loan. Besides, you can secure and use a VA loan multiple times since it is a lifetime benefit.
Understanding How a VA Loan Works
VA loans have been around since 1944, helping millions of Veterans and service members become homeowners. Understanding how it works can make the difference in ensuring that you also become a beneficiary of this home loan program.
A VA loan is a zero-down payment mortgage available to Veterans, active-duty military personnel, and their eligible spouses. Since it is a government-insured loan program, you don’t have to pay a down payment, private mortgage insurance, or mortgage insurance premiums. Through the U.S. Department of Veteran Affairs, the government guarantees the loan, promising to cover a specific percentage in case of foreclosure.
In most cases, you don’t have to apply for a VA loan directly through the government agency unless you are a Native American financing a home on federal trust land. Accredited private and commercial lenders such as banks, credit unions, and mortgage companies do the actual funding and issue the mortgage to successful applicants.
The VA is only responsible for setting the loan terms and requirements, verifying eligibility, and issuing qualified applicants a Certificate of Eligibility (COE). You must obtain a COE before applying for a VA home loan. The document is downloadable online, or you can get it from a VA-approved lender. It shows your military service history and confirms that you qualify for a VA loan from the lender.
However, having a COE might not be enough to secure a VA loan. Some borrowers have different underwriting requirements that you must meet to receive financing. The good news is that most lending institutions are lenient on VA loan requirements because of the VA’s guarantee, meaning you may still get approved for a VA loan even with a less than favorable credit history.
Once you meet all eligibility requirements and get approved, the lender may pay the home seller directly or deposit the funds in your account. You can use the funds to buy a new home or repair or renovate an existing house.
Unlike other zero-down payment loans, VA home purchase loans do not have restrictions on the property type or location. Single-family homes, duplex houses, condos, and manufactured homes can qualify as VA-eligible properties.
Types of VA Loans
There are four central VA loans available to eligible borrowers. Each VA loan has varying eligibility requirements, and knowing the different types can help you pick the right option for your housing needs.
Here’s a breakdown of the four types of VA loans:
VA Home Purchase Loan
A VA home purchase loan is the most common zero-down payment loan under the VA housing program. The loan has better terms, lower interest rates, and fewer closing costs than other mortgages from private lenders.
To apply for a VA home purchase loan, you must obtain a COE and meet the lender’s standards for credit. Eligible borrowers can use their loan proceeds to buy, build, repair, or improve a home with zero down payment.
Cash-Out Refinance Loan
Let’s face it. Many Veterans have difficulty getting civil jobs or running businesses after retiring from active service, resulting in reduced income. Things can get complex if you are already servicing a mortgage. Fortunately, you can get a financial reprieve by applying for a cash-out refinance loan on your existing VA loan.
A cash-out refinance loan replaces your existing VA loan with a new one under new terms. It works like a reverse mortgage where the lender pays off your loan balance and issues another. This credit option allows you to take out some cash against your home value to cover your debts, healthcare costs, and daily expenses. You can also use it to refinance a non-VA loan into a VA loan as long as you are eligible.
Interest Rate Reduction Refinance Loan (IRRRL)
The primary objective of VA loans is to help Veterans and service members buy homes and stay in those homes. The VA department has implemented various measures to prevent foreclosures and help Veterans from falling into financial crisis.
If you notice that you can no longer afford monthly mortgage payments on your VA loan, you can apply for an Interest Rate Reduction Refinance Loan (IRRRL). This credit option replaces your existing loan with a new one under reduced interest rates to stabilize your payments and make them more affordable.
Native American Direct Loan (NADL)
The Native American Direct Loan is a particular VA loan tailored for eligible Native American Veterans and non-Native American Veterans with Native spouses. The loan allows you to buy, construct, or improve a home, provided it’s on federal trust land.
Like other VA loans, a NADL has no down payment and no private mortgage insurance, with limited closing costs. It is a lifetime benefit, meaning you can reuse it several times in the future. You can also use the loan to refinance an existing VA-backed home loan or reduce your interest rates.
VA Loan Eligibility
VA zero down payment loans have various qualification requirements, and not all Veterans or active service members are eligible. The eligibility requirements for VA loans depend on the loan type, military service and discharge history, lender’s credit standards, income requirements, and credit score.
To qualify for a VA-backed loan, the home you intend to buy, build, or improve with the loan must be your primary residence. You must also obtain a Certificate of Eligibility (COE) from the VA Department to be eligible.
Here are the minimum VA loan eligibility requirements. You must meet at least one to qualify.
Served actively for 90 consecutive days without a break
At least 24 continuous months of active-duty service during the Gulf War period to present
Served actively for at least 90 days before being discharged for a hardship or a force reduction
Served less than 90 days and was discharged because of a service-related disability
Served actively for 181 days during peacetime
Served for more than six creditable years with the National Guard or Reserves
Surviving spouses of Veterans can apply for a VA loan if:
The Veteran has been MIA for more than 90 days
The Veteran has been a Prisoner of War for more than 90 days
The Veteran died in service or from a service-related disability, and the spouse remains unmarried or married after age 57 years or after December 16, 2003
VA Loan Limits
VA loans do not have limits if you have full entitlement, meaning you’ve repaid your previous VA loan, had a foreclosure but repaid the loan in full, or haven’t used your home benefits. You can borrow as much as the lender is willing to give you, but your credit history, income, and assets might sometimes determine the maximum amount you can borrow.
Can I Apply for a VA Loan More Than Once?
You can apply and obtain a VA loan as often as you wish if you meet the minimum eligibility requirements and borrowing terms and have full entitlement. A VA home loan is a lifetime benefit, meaning eligible borrowers can use it multiple times. Sometimes, you can have two VA loans simultaneously.
Applying for a VA Home Loan
Whether you are a Veteran, an active service member, or the surviving spouse of a Veteran, applying for a Certificate of Eligibility is the first step to getting a VA home loan, assuming you’ve already identified a VA-approved property. The VA department issues this document to eligible applicants, showing the lender you qualify for the benefit.
Requesting a Certificate of Eligibility is a fast and straightforward process. You only need to visit the VA’s eBenefits online portal and fill out the form for instant eligibility determination. You can also obtain a COE form from a VA-approved lender, download the VA Form 26-1880, and fill it out appropriately before mailing it to the listed address.
Veterans, former National Guard members, Reserves, and surviving spouses must attach copies of the relevant discharge documents. Active-duty service members need a statement of service showing their full name, Social Security number, date of birth, date of duty entry, lost time duration, and the command’s name.
After obtaining a COE, you can proceed to apply for the VA loan. Here are the steps:
Find a VA-Approved Lender
The Department of Veterans Affairs does not issue VA loans to applicants. Private and commercial lenders, including banks, mortgage companies, and credit unions, provide the actual financing. With this in mind, you must find a VA-approved lender to finance your homeownership journey.
The quickest way to find an accredited private lender is by visiting or contacting your VA regional loan center for more information. You can get contact details online for a chance to talk to a VA home loan representative.
Discuss Available VA Loan Options
Once you get a credible lender, they’ll request your Certificate of Eligibility to ratify that you qualify for the VA home loan. After confirming your details, you can discuss with the lender the available VA loan options and borrowing terms. You can choose four VA loan types, but the most common financing option is the VA home purchase loan.
Provide Your Lender with All the Requested Information
Even though the VA usually sets eligibility requirements and borrowing terms, some lenders have specific credit standards that you must meet along with the VA requirements to secure the loan. These qualification requirements revolve around your creditworthiness, income, and reserve funds.
For faster processing of your loan, provide your lender with all the requested information, including:
- Copies of the most recent paycheck stubs and bank statements
- A copy of your federal income tax returns
- W-2 forms for the previous two years
- Credit score report (not requested by all lenders)
- Home appraisal report
- Home valuation report
- Any other requested information
If you meet all the VA’s eligibility requirements and the lender’s borrowing terms, you will get pre-approved before the final approval a few weeks later. The pre-approval stage allows the lender to verify all the information provided and evaluate your ability to repay the loan.
The pre-approval process does not take more than 24 hours if your documentation is in order, and you can use it to negotiate a pre-sale agreement with the seller. The final VA loan approval takes anywhere from 30 to 50 days, depending on the lender.
Discuss the Funding Fee and Closing Costs
Unlike traditional loans and mortgages, VA home loans have fewer closing costs, which can be paid by the borrower, the seller, or even the lender, depending on your agreement. Despite the limited closing costs, borrowers may need to pay a funding fee.
A funding fee is a one-time payment on VA-backed loans to help fund the home loan program for future borrowers. Since VA loans do not require a down payment or private mortgage insurance, the government uses taxes to insure the loans. Paying a funding fee lowers the cost for taxpayers significantly.
However, you might be exempt from paying a funding fee if:
You are currently receiving VA compensation for service-related disabilities
You are retirement benefits or active-duty pay but are eligible to receive VA compensation for service-related disabilities
You are a surviving spouse receiving Dependency and Indemnity Compensation
You are an active service member with a memorandum rating to receive compensation for a pre-discharge claim
The Benefits of a VA Loan
- Zero down payment
- No private mortgage insurance or mortgage insurance premiums
- No loan limits if you have full entitlement
- Lower interest rates
- Flexible eligibility requirements
- No prepayment penalty
- Lifetime benefit
- Multiple refinance options
- Foreclosure avoidance programs
Possible Downsides of a VA Loan
- VA funding fee
- Available for primary residences only
- Some home sellers are reluctant to accept VA loans as payment
The Top 5 Things to Do in Walton County, Florida
Walton County is renowned for its coastal dune lakes, white sandy beaches, and green forest canopies, making it the ideal place for nature lovers to visit and possibly stay. The county has numerous attractions and places of interest to keep you informed and entertained.
Here are the top 5 things to do in Walton County, Florida:
Visit Seaside Farmer’s Market
Sandwiched between Grayton Beach and Rosemary Beach, the Seaside Farmer’s Market is the place for fresh fruits, vegetables, cereals, baked goods, and farm produce. The market opens only weekly, on Saturdays, so ensure you include it in your itinerary.
Grab a Mouthwatering Bite in South Walton
If you want to stimulate your taste buds and sample different cuisines, a visit to South Walton is a must. The area is renowned for its buzzing restaurant scene that guarantees a memorable culinary experience.
Cruise on the Hydrojet Dolphin
For those who love boat excursions and marine life, a cruise on the Hydrojet Dolphin promises to be one unforgettable experience. Your journey starts from Destin Harbor, heading east into the Gulf of Mexico for a chance to see and take pictures of live sharks, sting rays, dolphins, and sea turtles.
Escape to Shell Island
If you want to get away from the crowded spaces and enjoy peace and quiet, do not hesitate to visit the secluded Shell Island. The location is ideal for snorkeling and shell hunting, but you must board a shuttle to get there.
Tour the Grayton Beach State Park
The Grayton Beach State Park is the ultimate destination for residents and tourists. The park boasts long stretches of white sandy beaches and a coastal dune lake, making it ideal for sunbathing, hiking, and nature trails.
Get Pre-approved for a VA Loan Today!
Getting a VA loan does not have to be complicated as long as you meet the minimum eligibility requirements. Talk to a VA loan representative today to get pre-approved within hours.