Loans for Veterans: Simplifying the Mortgage Process for You

What kind of loans are available for veterans?

Veterans Administration loans, commonly called VA Loans, are typically the most popular types of loans for veterans. There are many benefits to this type of loan, and it is available to active military members, non-active military members, as well as retired military members. Moreover, VA Loans are partially backed by The Department of Veterans Affairs and require no down payment. Those who qualify for this type of loan can use it to purchase a primary residence or refinance a mortgage that already exists.

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Pros and Cons of Loans for Veterans

Pros of Loans for Veterans

No Down Payment Required: One of the biggest perks of a VA loan is the ability to buy a home with no down payment. Qualified borrowers can finance 100% of the home’s purchase price—something most loan programs don’t offer. For example, FHA loans typically require at least a 3.5% down payment.

No Private Mortgage Insurance (PMI): Unlike most other loan types, VA loans never require private mortgage insurance, even with zero down. This can save borrowers hundreds of dollars each month compared to conventional or FHA loans that do require PMI if you put down less than 20%.

Flexible Credit Requirements & Lower Rates: The Department of Veterans Affairs doesn’t set a minimum credit score for VA loans, giving lenders the flexibility to consider your entire financial picture. Plus, VA loans often come with lower interest rates* compared to other loan types, helping you save over the life of your loan.

No Prepayment Penalty: VA loans give borrowers the freedom to pay off their mortgage early or make extra payments without worrying about prepayment penalties. This flexibility can help you save money on interest and shorten your loan term.

Relaxed Property Eligibility: VA loans can be used for a wide range of property types, including single-family homes, condos, and manufactured homes. This flexibility makes it easier for veterans to find the home that fits their needs and lifestyle.

Cons of Loans for Veterans

Only for Primary Residences: VA loans can only be used to purchase or refinance your primary residence. If you’re looking to buy a vacation home or investment property, you’ll need to explore other loan options.

VA Funding Fee: Most VA borrowers are required to pay a VA funding fee, which helps sustain the program for future service members. While it can often be rolled into the loan, it’s still an added cost to consider.

Limited Eligibility: VA loans are exclusive to eligible veterans, active-duty service members, and certain surviving spouses. That means not everyone can take advantage of the program’s benefits.

Slower Equity Growth: Because VA loans allow for little or no money down, borrowers start with minimal equity. This can be a disadvantage if property values dip shortly after purchase, potentially leaving you with less financial cushion.

Eligibility Requirements for Veteran Loans

Veterans looking to utilize a VA loan must receive a VA Home Loan Certificate of Eligibility to ensure they are truly eligible for this type of loan product. Here are the requirements to qualify, if any apply to you, then you are eligible for a VA Loan!  

• Served 90 consecutive days of active service during wartime.   
• Served 181 consecutive days of active service (not during wartime).    
• Have 6 years of service in the National Guard or Reserves.    
• A spouse of a service member who passed away during duty or a service-related disability.    

There are also additional factors that could qualify you for a VA loan. 

• Served from November 1, 1955 (Vietnam War Era).   
• A service member or veteran mobilized to perform full-time National Guard duty for not less than 90 cumulative days, including at least 30 days consecutively.   
• A veteran, service member, or certain surviving spouse with VA-guaranteed home loans in areas that the President declares are major disasters and your residence has substantial damage.  

Work with a Loan Officer to see if you are eligible!

Can Veterans get FHA loan?

Typically, VA loans serve more beneficial to veterans, however, FHA Loans can be a great alternative option. Although VA loans and FHA mortgages have many traits in common since they are both government-backed mortgages, they are not identical. FHA Loans are governed by The Federal Housing Administration, and offer flexible guidelines for borrowers with limited down payment funds and an imperfect credit history. Here is a snapshot of an FHA loan so you can consider all your home loan options and choose the mortgage that fits your needs.

What are the advantages of an FHA Loan?

• Low Down Payments: As little as 3.5% down will work in most instances, and 5% covers most others.
• Higher Loan Amounts: In some areas, FHA maximums can exceed conventional loan limits.
• Lower Total Cash-to-Close: Sellers can help pay closing costs, and borrowers can receive gift money toward their down payments.
• Streamlined and Cash-Out Refinancing: Subsequent refinancing can be far easier and more lenient than with conventional loans.
• Purchase & Rehab Financing: The FHA 203k loan can be a great option for the purchase of homes needing anything from a quick spruce-up to major remodeling.

What are the disadvantages of an FHA loan? 

• PMI (Private Mortgage Insurance): Private mortgage insurance (PMI) is not cancelable.   
• Not Condo Friendly: Many condominiums do not qualify for an FHA loan.
• Owner-Occupied: FHA loans cannot be used to finance a second home, a rental property, a vacation home, or an investment property.
• Loan Limits: FHA loan limits differ from state to state.  

What is the difference between a VA direct loan and a VA-backed loan?  

With a VA-backed home loan, The U.S. Department of Veteran Affairs will guarantee a portion of the loan you get from a private lender. Therefore, since there is less risk involved for the lender, it is typically easier for eligible borrowers to qualify for this type of loan. VA-backed purchase loans can help you buy, build, or improve your home.   

On the contrary, a VA direct home loan is backed completely by The U.S. Department of Veterans Affairs. This means the borrower will work directly with the VA to apply for a mortgage loan. Specifically, The Native American Direct Loan program (NADL) is a VA direct home loan available to veterans who are Native American, themselves, or their spouses.  This program can help obtain a loan to purchase, build, or improve a house on federal trust land.  

Additional types of Home Loans for Veterans

• VA Interest Rate Reduction Refinance Loan (IRRL): The Department of Veterans Affairs (VA) Interest Rate Reduction Refinance Loan (IRRRL) can be used to refinance an existing VA loan to lower the interest rate. The funding fee for the IRRRL is reduced to .5% regardless of service history or prior usage.
• VA Cash-out Refinance: A VA-backed cash-out refinance loan lets you replace your current loan with a new one under different terms. Additionally, you can take cash out of your home equity to pay off debt, pay for school, make home improvements, etc.

How to Apply for a Veteran Mortgage Loan  

1. Find a VA-Approved Lender: Find a lender that the Department of Veteran Affairs approves for issuing VA Loans. At Direct Mortgage Loans, we can offer VA loans to those who meet the eligibility criteria.  

2. Obtain a Certificate of Eligibility: For pre-approval, we will need your certificate of eligibility. This information will verify your eligibility for a VA loan based on your service history. Typically, this only takes a couple of minutes and can be done online through the VA e-benefits portal.  3.

3. Apply for a VA Home Loan: Now you’re ready to apply for a VA home loan! During the application process, your lender will verify your income, credit, and employment using the VA financing requirements. Typical documents needed include:  

• Tax Returns 
• W2’s (past 2 years) 
• DD124 
• Rental History 
• Employment Verification 
• Driver’s License

4. Find a Home: Finally, shop for your dream home with a real estate agent. When you find a home you like, submit an offer. If your offer is accepted, then you and your lender will issue a loan estimate. All you have left is the underwriting and pre-approval process.  

FAQs About Loans For Veterans

Can I only use a VA loan once?

The VA loan is a lifetime benefit. You can even use it more than once, and at the same time.

Do veteran loans take take long to close?

VA Loans close just as fast as conventional loans.

Can I only have one VA Loan?

A VA Loan can only be used to purchase a primary residence. In the event you decide to move from your first home, you can keep the first home with your VA Loan, and rent it, or you can use the home as a second home.

Is the VA appraisal process a nightmare?

The VA appraisal process does not really differ from your average FHA appraisal process. Conventional appraisals and VA appraisals are vastly different.

Do VA appraisals undervalue homes?

All appraisals are influenced by subjective judgments and statistics from comparable homes.

Are veteran loans are risky?

VA Loans have the lowest foreclosure rate of any type of mortgage.

If I’ve filed for bankruptcy or have had a foreclosure, will I still be able to obtain a veteran loan?

This is only true if the bankruptcy occurred in the past two years from the time of your loan application.

Do veteran loans have higher interest rates?

VA loans are backed by the government and government loans tend to offer the lowest rate available on the market. * As a “thank you” for your service, your VA Loan eligibility means you can save money over the life of your loan, simply by locking-in lower VA mortgage rates.

Do all lenders offer loans for veterans?

Lenders must be approved directly by the VA to offer loans for veterans.

Eligibility and approval is subject to completion of an application and verification of home ownership, occupancy, title, income, employment, credit, home value, collateral and underwriting requirements. Direct Mortgage Loans, LLC NMLS ID# is 832799 (www.nmlsconsumeraccess.org). Direct Mortgage Loans office is located at 11011 McCormick Rd Suite 400 Hunt Valley, MD 21031. Equal housing lender.

*Rates subject to change.