Step-by-Step Guide: How to Get a VA Loan
If you have served in the U.S. military or are presently serving, you can get a loan backed by the U.S. Department of Veteran’s Affairs (VA) to finance up to 100 percent of a primary home purchase with no mortgage insurance and no prepayment penalty. (Vacation and rental homes are excluded from this program.)
The process for getting a VA mortgage is similar to the traditional mortgage process, with a few differences along the way. Here’s a look at the steps you need to take:
Step 1: Determine Your VA Loan Eligibility
VA loans, which are backed by the Veteran’s Affairs department and made by local mortgage lenders throughout the country, have a critical first step: proving you’ve met the VA’s service member requirement.
You prove this with a document called the Certificate of Eligibility (COE). The type of COE you need depends on your type of service: veteran, active duty service member, current or former National Guard, etc.
You can obtain your COE yourself through the VA benefits portal, by requesting via mail, or you can have your lender obtain it for you. See the full instructions for obtaining your COE for more details.
Step 2: Shop for VA Lenders
The VA requires all VA-approved lenders to include a COE in their loan underwriting process, so the fastest way to get your COE is through a VA lender — they can usually obtain it for you within minutes through a lender-only portal provided to lenders by the VA.
It’s easy to find lenders who make VA loans. You can screen VA lenders by viewing the rates and reviews for lenders who come up in your search results.
Then you can make direct contact to further interview with the VA lenders who look most favorable to you.
Step 3: Select VA Lender(s) and Get Pre-Approved
Often people start shopping for homes before they’ve been pre-approved by a lender, but this can lead to trouble if you can’t get a loan for a home you want.
So the next step is to apply for a VA loan with one or more of the VA lenders you feel most comfortable with, and get pre-approved.
Lenders must provide formal written rate and fee quotes to you within three days of application. Familiarize yourself with VA closing costs here.
After obtaining your COE (or reviewing the one you’ve already obtained), the lenders will ask you to provide detailed residence, employment, income, asset, and debt documentation.
It’s critical to provide all documentation your lender requests in a timely fashion. All lenders must follow the same VA loan approval guidelines, so if one lender is asking for less upfront, they may need to ask for it later.
At a minimum, you will need to provide:
- Full credit history, including scores from the three major credit bureaus (Equifax, Transunion, Experian), obtained when you authorize a lender to run your credit report
- Two years of residence history, including rental or ownership costs
- Two years of employment history (See notes below if you’re on active duty.)
- Two years of filed tax returns
- Two years of W2s for all jobs
- Most recent two months’ statements for all bank, investment, and retirement accounts
The VA says your total monthly housing cost plus all other monthly payments (car loans, student loans, etc.) cannot exceed 41 percent of your income. There are select exceptions to this rule, which you can discuss with your lender.
If you’re on active duty, you’ll need a Leave and Earnings Statement (LES) with an Expiration of Term of Service (ETS) date less than 12 months after loan closing to prove income, and a Statement of Service to prove ongoing service and income.
If your separation date is 12 months or less from your loan closing, you must document income in one of the following ways:
- Evidence of re-enlistment or extension showing new ETS date more than 12 months from date of loan closing.
- Statement that you intend to re-enlist, accompanied by a statement from your Commanding Officer that you’re eligible to re-enlist and that they believe your re-enlistment will be granted.
- Offer letter from private employer after release from active duty. Must include start date, rate of pay, and whether employment is full-time or part-time.
Step 4: Choose a Real Estate Agent
Once your VA lender obtains your COE, receives all of your documentation, and gets your loan approved by the lender’s underwriter, you’re ready to find a local real estate agent.
Since you know what you’re approved for, you can select price ranges in your search to find a specialist in your price point.
Your agent doesn’t need to have particular specialty with veterans or VA loans, but make sure you introduce your lender to your agent.
This way, your lender can verify for your agent how much home you’re approved to buy with VA financing.
Step 5: Look for Homes and Write Offers
Your agent will show you properties until you see something you want to write an offer on. If you’re curious what the monthly mortgage will cost on a particular home, you can use a VA loan calculator to estimate the price.
An offer is a purchase contract that your agent presents to the seller’s agent.
The purchase contract tells the seller what price you’re willing to pay, what inspections and/or repairs you want done, how fast you’ll complete your inspections, and how fast you can close.
The purchase contract should be accompanied by a pre-approval letter from your lender to show the seller that you have been approved.
Your pre-approval ensures that you as a borrower are approved, but a loan is made to a borrower and a property, so the pre-approval letter will usually indicate that the loan won’t be complete until the lender has reviewed the purchase contract, title report, appraisal, and any other necessary inspections.
If the seller accepts your offer, you’re in contract to buy the home.
Step 6: Lender Completes Appraisal and Other Property Underwriting
Your lender will order a VA appraisal on the property you’re in contract to buy. Even though your lender orders the appraisal, the VA appraiser isn’t a lender employee, but rather an independent, licensed, VA-approved appraiser who is randomly assigned by the nearest VA regional loan center.
This ensures that the appraisal won’t be biased in any way.
The VA appraisal is used to determine whether the home is worth what you’re willing to pay for it.
The VA appraisal is also used to assess the condition of the property, with focus on verifying the following items:
- Functional roof, heat, plumbing, and electrical systems.
- No pest issues such as termites.
- No lead-based paint.
- No water intrusion.
- No health or safety issues.
If any of these items are issues, they must be fixed before the loan can close. The buyer and seller must negotiate who is going to pay for the repairs.
In addition to the appraisal, the lender must also approve:
- The purchase contract, including any special terms such as seller or agent credits to buyer.
- The title report to ensure there are no liens on the property when it changes hands.
Step 7: Closing
Once all of these items are cleared, and as long as your borrower profile hasn’t changed since you were pre-approved, your loan is ready to close.
The lender will send documents to an escrow company or attorney for you to sign.
Depending on your state, the lender will send your loan funds with your documents, or they will send the funds once they receive your signed documents.
Once the loan funds, the property can officially change owners from the seller to you.