0% Down Payment Options
VA loans are available exclusively to veterans and active-duty personnel and are guaranteed by the U.S. Department of Veteran Affairs. They offer low rates and flexible qualifying requirements.
0% down payment requirement for eligible veterans (must have full entitlement)
Competitively low interest rates
No mortgage insurance
Less stringent qualifying guidelines
Active-duty member of the military or veteran meeting minimum length-of-service requirements; or
Surviving spouse of a military service member who died while on active duty
Minimum credit score of 580
Primary residences only
What is a VA loan?
VA loans are part of a government loan program specifically designed for veterans and surviving spouses. The U.S. Department of Veteran Affairs (VA) guarantees these loans, making them safer from an investor’s perspective and contributing to advantageous loan terms such as a 0% down payment and more flexible underwriting guidelines.
VA Loan Limits
As of 2020, county loan limits do not apply to VA financing if you have full entitlement. Instead, your credit score will determine the maximum allowable loan amount.
Entitlement guarantees that the VA will pay your lender the lesser of up to $36,000 or 25% of your loan amount if you default. Your Certificate of Eligibility (COE) is a document from the Department of Veterans Affairs that confirms your eligibility to obtain a VA home loan and will indicate the amount of entitlement you have available.
If you have never used your VA loan entitlement to purchase a home or have fully repaid a prior VA loan (otherwise known as “restoring” your entitlement), your COE will say that the basic entitlement is $36,000.
With full entitlement ($36,000), you will not be restricted by loan limits and can pursue a loan up to $3M with 0% down with a credit score of at least 720.
If you have used a portion of your entitlement, a down payment may be required. Calculating the figures can get tricky – our mortgage experts can help determine exactly what is needed!
Lenient Credit Guidelines
VA financing is very lenient when it comes to credit scores. VA loans have a minimum credit score requirement of just 580. You can also qualify with a recent credit event such as a bankruptcy, foreclosure, or short sale.
Low Monthly Payments
Interest rates for VA loans tend to be lower than rates for Conventional and FHA loans, especially if your credit score is on the lower side. There is also no monthly mortgage insurance required, which can help keep monthly payments low when compared to a Conventional or FHA loan.
0% Down Payment
VA financing allows you to obtain a loan with 0% down, which means you will only need to pay for closing costs. To keep out-of-pocket costs even lower, you can opt for a higher rate and take a large lender credit to help offset closing costs, instead of paying for these out of pocket.
Longer Closing Timeline
VA loans have longer closing timelines as the loan and appraisal must be submitted to the VA for approval. This puts an average close of escrow timeline for VA loans around 30 days.
Primary Residences Only
VA loans can only be used to purchase a primary residence. This means you will need to meet conventional financing guidelines regarding credit score, down payment, and debt-to-income ratios if you are hoping to purchase a second home or investment property.
Most clients opt to finance the funding fee into the loan amount rather than pay for it upfront, which increases the monthly payment amount. The funding fee is higher for subsequent uses of the VA loan program, so this will increase if you’ve had a VA loan in the past.
Certificate of Eligibility for VA Loans
A Certificate of Eligibility is awarded to eligible active-duty military members and veterans. You can obtain this document directly from the VA or your lender can access/order the certificate from the VA’s website. The document will contain relevant information needed to determine your eligibility for a VA loan.
Below are the main details lenders need from the certificate of eligibility:
- Basic entitlement amount
- Entitlement code
- Funding fee exemption or subsequent use
- Prior VA loans
- Branch of service
- Disability amount collected
If the certificate has not yet been created, you or your lender can create an order on the VA’s website using your personal information and relevant information found on a DD-214.
If you have previously used your entitlement and then sold your property, refinanced into a different program, or paid off your loan, you can apply for a restoration of entitlement. This is also done through the VA’s website; some evidence of your prior loan being closed is all that may be needed.
VA Loan Eligibility Requirements
- 90 days of active duty during wartime or 181 days of active duty during peacetime
- Veteran must have been discharged or released on conditions other than dishonorable
- Members of the Reserves or National Guard may be eligible upon 6 years of service in the Selected Reserve
- Un-remarried surviving spouses of veterans who died because of service-related injuries
- 580 minimum credit score
- Property must be owner-occupied
- Condominium projects must be actively approved by the VA
- Must meet the required residual income