How to Apply for a VA Loan

Veterans Administration loans are excellent tools for current and former military members to realize their homeownership dreams. Most VA loans are offered as a partnership between private lenders and the U.S. Department of Veterans Affairs, so they work a little differently than other mortgages—starting from when you first apply. 

Learn the step-by-step process for applying for a VA loan.  

How to Apply for a VA Loan

There are several types of VA loans, most of which are offered through private lenders rather than the VA itself. Among these, VA-backed purchase loans are the most common, making up 75% of all VA loan originations in May 2024. Here, we’ll focus on how to apply for a VA loan to buy a home. The main steps are:

1. Get your Certificate of Eligibility (COE): This shows your lender how much loan the VA will insure.
2. Gather other documents: In addition to your COE, your lender will also need copies of your financial statements and proof of identity.
3. Analyze your finances: Calculate your home-buying budget based on factors like your down payment savings, budget, and credit.
4. Shop for lenders: Get pre-qualified with different lenders to see what rates and fees they may charge you. 
5. Buy a home: Have a real estate agent help you find the right home and guide you and your lender through the rest of the home-buying process. 

Get Your Certificate of Eligibility (COE)

To get a VA loan, you’ll need a Certificate of Eligibility (COE) to show your lender. The COE lists out your “entitlement,” meaning the amount of your loan that the VA will pay out to your lender if you default. Lenders also use it to calculate what—if any—down payment you’ll need to bring to the table. 

If you don’t currently have a VA loan, you’ll generally have full access to your entitlement and won’t be required to make a down payment. (There are a few exceptions, such as if you defaulted on a VA loan in the past.)

To get a COE, you’ll need a copy of your discharge papers (DD214) if you’re a veteran. Active-duty servicemembers will need to get a signed statement of service. You can request a copy of your COE online, by mail, or through VA loan lenders. 

Gather Other Documents

To get a VA loan, you’ll need to meet requirements from the U.S. Department of Veterans Affairs and a private lender willing to lend you the money. By getting a COE, you show that you meet the VA’s standards. The next step is to qualify with a mortgage lender. Most lenders will look for the same documents when you’re shopping for a mortgage—essentially those that show proof of your identity and financial situation. 

You can make your application process easier if you round up the following documents in advance:

• Most recent pay stub
• W-2s from the past two years
• Tax returns from the past two years
• Bank account statements from the past two months
• Investment account statements from the past two months
• Government-issued ID, such as a driver’s license or passport
• Statements showing other income, such as 1099s from freelancing

Place digital copies of these documents in a folder you can easily share with your lender. As a bonus, it’ll also help you make sense of your finances so you can figure out what price range you can afford. 

Analyze Your Finances

You’ll need a good handle on your financial situation to avoid common home-buying mistakes, like applying for a loan before you’re ready or buying a home so expensive you have little cash flow and end up house-poor. Here are the main factors to consider:

• Budget: It’s a good idea to get in the habit of budgeting. At the least, make a detailed budget of all your monthly income and expenses, so you know how much you have left over for a mortgage payment and other home expenses.
• Credit score: Your credit score is one of the biggest factors lenders look at when approving your application and setting your interest rate. Looking this up in advance can tell you what sort of rates you might get, and—ultimately—how much home you can buy.
• Credit report: Check your credit report with each of the three credit bureaus to ensure accuracy. Make note of any negative marks like defaulting on a loan, since some lenders may disqualify you. You can check your credit report at AnnualCreditReport.com.
• Closing costs: In addition to the VA loan funding fee (1.25% to 3.3%), estimate other closing costs that may cut into your purchasing power. In general, buyers typically pay between 2% and 7% for closing costs.
• Down payment: You aren’t required to make a down payment with your first VA loan, but it’s wise to do so. You’ll have a smaller loan and possibly a smaller interest rate, too—both of which will make for a smaller monthly payment.

Together, you can use this information to help you determine how much you can afford to spend on a home. Remember to leave room in your monthly budget for other costs, such as home repairs and maintenance, and an emergency fund.

Shop for Lenders

Each lender chooses how much interest and fees to charge VA loan borrowers. You can save thousands of dollars and increase your buying power by making sure you’re getting the best deal on your mortgage, and you do that by shopping around just as you would for any other major purchase. 

Aim to get pre-qualified when shopping for any loan. The more lenders you check your options with, the greater your odds of finding the best VA loan. 

When you get pre-qualified with a lender, they’ll do a soft check of your financial details and let you know how much they’ll likely be willing to lend to you, but it is not a guaranteed approval. Make sure you also ask for the interest rates and fees they charge. Compare the different loan offers, and select the one that best fits your priorities.

Buy a Home

Now that you have the financing piece lined up, there’s just one more thing to find: your home. Reach out to a real estate agent to help you through this process. You can submit an offer and pre-approval letter when you find the home you want. 

If the sellers accept your offer, your real estate agent will help coordinate the closing process, including any requirements your lender may have before issuing the loan funds. This typically includes getting a VA appraisal and making sure the property meets other VA loan underwriting requirements.

Alternatives to a VA Loan

A VA loan is an excellent option for those who qualify, but only some do. In addition, other types of loans may be a better option. Before you commit to getting a VA loan, review alternative loan types:

• FHA loan: Available to the general public, Federal Housing Administration (FHA) loans may be easier to get if you have a low credit score and little down payment savings. But they may be more expensive in the long run.
• USDA loan: If you’re not a high-income earner and don’t live in a major metropolitan area, you may qualify for a no-down-payment loan backed by the U.S. Department of Agriculture.
• Conventional loan: Standard mortgages that aren’t backed by the government may be a more affordable option in some cases if you have excellent credit and a high down payment. 
• Postponing home buying: If you’re not able to get a good deal on a mortgage and you can afford to wait, you can give yourself a big leg up by taking time to improve your credit score, boost your income, pay down debt, and save a bigger down payment. 

The Bottom Line

Aside from a few extra requirements, like lining up your COE and meeting specific property guidelines, applying for a VA loan is similar to getting a standard mortgage. VA loans give you an advantage over other options, such as funding fee waivers for disabled veterans, lower interest rates, increased buying power, and an easier path to homeownership for those with bruised credit. The right loan for you will ultimately depend on your circumstances.

Frequently Asked Questions (FAQs)