What a VA Loan Does and How It Works
A VA loan is a mortgage backed by the Department of Veterans Affairs that lets you buy a home with no down payment and no mortgage insurance. You borrow money from a private lender — a bank, credit union, or mortgage company — but the VA guarantees a portion of that loan, which means the lender takes less risk and can offer you better terms than a conventional mortgage.
The process works like this: you get a Certificate of may be able to access from the VA, you find a lender who offers VA loans, you get pre-approved for a loan amount, you find a house and make an offer, the lender orders an appraisal, and once everything clears, you close on the home. The VA does not lend the money itself — it only guarantees the loan.
Because the VA backs the loan, lenders can offer rates and terms that are often better than what you would get with a conventional mortgage. You also avoid paying private mortgage insurance (PMI), which conventional borrowers with less than 20 percent down must pay. This can save you hundreds of dollars per month.
Key Takeaways
- You must obtain a Certificate of may be able to access from the VA before a lender will consider your application, and this certificate proves your military service record to the lender.
- VA loans require no down payment and no mortgage insurance, but you will pay a one-time funding fee (usually 2 to 3 percent of the loan amount) unless you are exempt due to disability.
- The house must be your primary residence — you cannot use a VA loan to buy an investment property or vacation home.
- A lender must order a VA appraisal to confirm the home is worth what you are paying; if the appraisal comes in low, you have options but cannot proceed at the higher price.
- You can use your VA loan benefit more than once, and if you have already used it, you may be able to restore it after you sell the home.
Getting Your Certificate of may be able to access
Before you contact a lender, you need a Certificate of may be able to access (COE). This document proves to the lender that you served in the military and meet the VA's service requirements. You can request a COE online through VA.gov, by mail, or in person at a VA office.
To request online, go to VA.gov, sign in with your login credentials, and select "Apply for Certificate of may be able to access." You will need your Social Security number and discharge papers (DD Form 214 or equivalent). The VA usually issues the certificate within a few business days if you apply online. If you apply by mail, send a completed VA Form 1880 along with a copy of your discharge papers to the address listed on the form; this takes two to four weeks.
Once you have the certificate, you can share it with lenders. Some lenders can verify your may be able to access directly with the VA, so you may not need to print and mail the certificate itself, but having it on hand speeds up the process.
Finding a Lender and Getting Pre-Approved
Not all lenders offer VA loans, so you will need to shop for one that does. Banks, credit unions, and mortgage companies all offer them, and rates and fees vary. Contact at least three lenders to compare interest rates, closing costs, and the funding fee they charge.
When you call or visit a lender, tell them you want to use your VA loan benefit and provide your Certificate of may be able to access. They will ask about your income, debts, credit score, and employment history. Based on this information, they will give you a pre-approval letter that states how much you can borrow. This letter is not a may provide — it is a conditional offer based on the information you provided — but it shows sellers that you are a serious buyer.
The lender will also explain the funding fee, a one-time charge added to your loan. For most first-time VA loan users, this is 2.3 percent of the loan amount. If you are a repeat user, the fee is 3.6 percent. If you have a service-connected disability rated by the VA, you are exempt from the funding fee. The fee is rolled into your monthly payment, so you do not pay it upfront.
Finding a Home and Making an Offer
Once you are pre-approved, you can start looking for a home. A VA loan can be used to buy a single-family house, a condo, a townhouse, or a multi-unit property (up to four units, if you live in one of them). You cannot use it to buy an investment property or a vacation home — the home must be your primary residence.
When you find a home you want to buy, you make an offer through a real estate agent or directly to the seller. Your offer should state that it is contingent on a VA appraisal and loan approval. This protects you if the appraisal comes in lower than the sale price or if the lender denies your loan for some reason.
Once the seller accepts your offer, you enter into a purchase agreement. At this point, the lender orders a VA appraisal, which is different from a conventional appraisal. The VA appraiser not only determines the home's value but also checks that it meets VA property standards — the roof, foundation, plumbing, and electrical systems must be in safe working order. If the appraiser finds major defects, the seller must fix them or you can walk away from the deal.
What Happens If the Appraisal Comes in Low
If the VA appraisal value is lower than the sale price, you have three options: you can renegotiate the price with the seller, you can make up the difference with cash out of pocket, or you can walk away from the deal without penalty (because your offer was contingent on the appraisal).
The VA will not lend more than the appraised value, so if you agreed to pay $300,000 but the appraisal says the home is worth $280,000, the lender will only approve a loan for $280,000. You would need to come up with the $20,000 difference yourself, or ask the seller to lower the price. Many sellers are willing to negotiate when a VA appraisal comes in low, because they know the buyer cannot proceed otherwise.
This is one reason why making a low offer initially can work in your favor — it gives you room to negotiate if the appraisal is lower than expected.
Closing on Your Home
After the appraisal is approved and your loan is fully underwritten, you move toward closing. The lender will send you a Closing Disclosure, a document that lists all the final loan terms, interest rate, monthly payment, and closing costs. You have the right to review this at least three business days before closing.
At closing, you will sign the mortgage note and deed of trust (or mortgage, depending on your state), and the lender will disburse the funds to the seller's attorney or title company. The title company will record the deed in your name and provide you with the keys. The entire process from offer to closing typically takes 30 to 45 days, though it can be faster or slower depending on the lender and local conditions.
After closing, you own the home and begin making monthly mortgage payments to the lender. The VA does not collect payments — your lender does. Your monthly payment includes principal, interest, property taxes, homeowners insurance, and possibly HOA fees if applicable. Because you have no PMI, your payment is usually lower than a conventional mortgage for the same loan amount.
Using Your VA Loan Benefit More Than Once
You can use your VA loan benefit more than once during your lifetime. If you have already used it once and paid off that loan, you can use it again to buy another home. If you still owe on a VA loan, you can sometimes use the benefit again if you have enough remaining entitlement, but this is less common and depends on the VA's calculation of your remaining benefit.
If you sold a home you bought with a VA loan and paid off the loan, you can request that the VA restore your entitlement. This means your full VA loan benefit becomes available again. You can request restoration by submitting a VA Form 1880 to the VA. Once restored, you can use the benefit to buy another home.
If you are currently using your VA loan benefit (still paying off the loan) and want to buy a second home, you may be able to do so if you have enough remaining entitlement and if the lender approves. This is less common because most people do not have enough entitlement left, but it is possible.
Frequently Asked Questions
Can I use a VA loan to buy a house with someone who is not a veteran?
Yes. You can buy a home with a spouse, family member, or friend who is not a veteran. However, only your portion of the loan will be backed by the VA. The lender will still require the co-borrower to meet standard credit and income requirements. Some lenders are more flexible about co-borrowers than others, so shop around.
What if I have bad credit or a low credit score?
VA loans are more flexible than conventional loans regarding credit, but lenders still have minimum credit score requirements, usually around 580 to 620. If your score is lower, some lenders will still work with you, especially if you have a strong income and low debt. Talk to multiple lenders — requirements vary widely.
Can I use my VA loan to build a new house instead of buying an existing one?
Yes. VA loans can be used to build a new home or to buy a newly constructed home. The process is similar, but the appraisal happens after construction is complete. If you are building, the lender will disburse funds in stages as construction progresses.
What happens if I want to sell the home before the loan is paid off?
You can sell the home at any time. When you sell, the proceeds from the sale go to pay off the remaining loan balance. If you sell for more than you owe, you keep the profit. If you sell for less, you are responsible for the difference (called being "underwater" on the loan). Once the loan is paid off, you can request that the VA restore your entitlement so you can use the benefit again.
Do I have to use the VA appraisal, or can I use a conventional appraiser?
You must use a VA-approved appraiser because the VA requires its own appraisal standard. The lender will order the VA appraisal as part of the loan process. You cannot substitute a conventional appraisal for a VA appraisal.