Your checklist for getting a VA loan

The federal government extends low-cost home loans to service members to thank and honor them for defending the United States.

This benefit, the Veterans Affairs Home Loan Program, or VA Loan, provides zero-down mortgage loans to veterans, active-duty personnel and surviving spouses. Because the federal government guarantees the loan, lenders can offer better terms such as lower interest rates.

The VA does not require a minimum credit score to apply. There also is no loan limit for first-time applicants and applicants who have paid off an existing VA loan. Applicants must still meet a lender’s loan requirements based on credit score, income and assets.

There are several pros and cons to the VA loan program. Weigh them to determine if the program is a good fit for you:

• No down payment
• No loan limit if a veteran has full entitlement and can meet the lender's financial guidelines
• No private mortgage insurance
• Limited closing costs
• Competitive interest rates
• VA home loans are a lifetime benefit
• No prepayment penalty

• Must pay a single upfront funding fee instead of private mortgage insurance
• The home must be the applicant's primary residence
• Homes must meet VA property standards
• Closing timelines can take longer
• Not all lenders offer VA loans
• Some sellers are hesitant to accept an offer with a VA loan due to longer closing times

An applicant can use proceeds of a loan to renovate a house bought with a VA loan. Renovation costs include energy efficient improvements and administrative costs of repairs.

• The rehab must be part of buying a home
• Repairs are ordinarily found in properties of comparable value in the community, such as roofs, foundations, flooring, plumbing, electrical and heating and cooling systems
• Loan may be used for inspection fees, permits and a contingency fund
• Loan may be used to make up to $6,000 of energy-efficient improvements to a home

Pro tip: VA loans are not a one-time benefit. They can be used multiple times.

Obtaining a VA Certificate of Eligibility is the first step in obtaining a loan, according to the VA. Then the certificate serves as official proof that a veteran, service member or eligible spouse has met the legal requirements to qualify for the loan program. A certificate can be requested online through the VA. A lender can use an online system called Web LGY. A certificate also can be requested by mail by filling out a Request for a Certificate of Eligibility (VA Form 26-1880) and sending it to the applicant's regional VA loan center.

Veterans should start the process for requesting a certificate by obtaining their formal separation document, known as DD214. Active duty servicemembers should obtain a statement of service, signed by a commander, adjutant or personnel officer, that includes the following information:

• Applicant's full name
• Social Security number
• Date of birth
• The date applicant entered duty
• The duration of any lost time
• The name of the command providing the information

The surviving unmarried spouses of killed or disabled veterans also can qualify for a loan. The veteran must have died on duty or suffered from a 100% disability. The widow also must be eligible for a Dependency and Indemnity Compensation benefit award. The DIC is a payment to survivors of a veteran killed or deceased by a service-related condition.

A surviving spouse should start by gathering the documents necessary to qualify, including:

• The veteran's discharge documents (DD214)
• A filled-out request for Determination of Loan Guaranty Eligibility-Unmarried Surviving Spouses (VA Form 26-1817)

Applicants who fail to meet the above criteria may still be able to qualify for a loan, the VA said. There are several, and the VA lists eligibility requirements online. Qualified applicants include:

• Discharged for hardship, or at the convenience of the government or a reduction in force
• Discharged for a medical condition or service-connected disability
• Discharged as part of an early-out and served at least 21 months of a two-year enlistment
• Attended a service academy (U.S. Military Academy, Naval Academy, Air Force Academy or Coast Guard Academy)
• Officer of the Public Health Service or the National Oceanic and Atmospheric Administration

The VA will review the request and make a decision. The status of the request can be checked online.

• The applicant presents the certificate to a lender
• The lender requests a VA appraisal of the house, which estimates the home's market value at the time of inspection
• The lender reviews the appraisal
• The lender reviews the applicant's credit and income information
• The lender decides whether to accept the application
• If accepted, the lender works with the applicant to choose a title company to close on the home

Pro tip: VA loans are not limited to first-time homebuyers.

More on this topic:

• The ins and outs of VA loans
• Buying a home in 10 steps
• Homebuyer's checklist for choosing the right neighborhood