Five things to know about getting a VA loan

Q: What do I need to know in order to get a Veterans Affairs mortgage?

A: VA loans are available to military veterans and active military members. They’re made through private lenders and are guaranteed by the Department of Veterans Affairs, so they do not require mortgage insurance. It remains one of the few mortgage options for borrowers who don’t have the money for a down payment.

The loan is made through a private lender and partially guaranteed by the VA, as long as certain guidelines are met.

Eligibility

Most members of the military, veterans, reservists and National Guard members are eligible to apply for a VA loan. Spouses of military members who died while on active duty or as a result of a service-connected disability may also apply.

“If you were on any type of foreign soil, more than likely you are eligible,” says Grant Moon, a veteran and president of VA Loan Captain Inc., a loan referral company.

Potential borrowers must obtain a certificate of eligibility. “But you don’t need the Certificate of Eligibility in hand to start the mortgage process,” says Chris Birk, director of education for Veterans United Home Loans. “Lenders in many cases can get this document for borrowers during the preapproval phase.”

Advantages of a VA loan

Loans guaranteed by the VA can be obtained without any down payment and they don’t require mortgage insurance.

“With a VA loan, you don’t have to save all the money you would have to save for a conventional loan,” Moon says.

Fees

Although the costs of getting a VA loan are generally lower than for other types of low-down-payment mortgages, they still carry a one-time funding fee.

“And if you receive disability compensation, the fee is waived,” says Michael Frueh, chief of staff for the Department of Veterans Affairs.

Underwriting requirements

The VA does not require a minimum credit score, but lenders generally have their own internal requirements. Most lenders ask for a credit score of 620 or higher, Moon says.

“There are players that would go lower, but they would probably charge a higher interest rate,” he says.

Borrowers must show sufficient income to repay the loan and shouldn’t have excessive debt, but the guidelines are usually more flexible than they are for conventional loans.

VA loans are available only to finance a primary home.

What if I stop paying the mortgage?

If the borrower of a VA loan can’t make payments on the mortgage, the VA can negotiate with the lender on behalf of the borrower.

Veterans struggling to make their mortgage payments can call 877-827-3702 for assistance.