VA home loans are mortgages guaranteed by the U.S. Department of Veterans Affairs (VA) and designed to help veterans, active-duty service members and surviving spouses buy or refinance homes.

This mortgage program is open to anyone who has served in the United States military, including the Army, Navy, Marine Corps, Air Force, Coast Guard and Space Force. By removing financial barriers, these loans help thousands of veterans become homeowners every year.

They work by making private lenders more comfortable with extending credit. These loans are backed by the U.S. government, which allows banks to offer better terms to borrowers.

If you're eyeing a VA loan, it has to be for your primary residence, and you'll need to move in within 60 days of closing the deal. Remember, this isn't for your summer getaway or an investment venture—these loans are strictly for your living space.

For those of you who are always on the move for work, you'll need to show that you've been a local and plan to keep your home base active. If military duties call you away, your spouse can step in to meet the occupancy rules.

Approaching retirement? You're still eligible to use your VA loan benefit even after you've retired, provided you meet the VA's service requirements.

While VA loans may come with certain rules about how you can use the property, they may also offer special VA home loan rates, down payment options and flexible credit requirements.

To qualify for a VA loan, you will need a Certificate of Eligibility (COE), which verifies your military service and eligibility for the program (also referred to as an entitlement). You must also meet specific service requirements, which vary depending on when and how long you served.

To determine if you qualify for the VA loan benefit, you must obtain your military service record, particularly DD Form 214. This form can be requested via the milConnect website, and you should provide it to your lender.

A nice plus of VA loans is that they have relaxed credit and income requirements compared to conventional loans. This flexibility is designed to support veterans and active-duty service members, making it simpler to secure financing. Let’s dig into the requirements further.

VA loan limits

There are no loan limits to the amount you can borrow with a full entitlement. This means that eligible veterans, service members and survivors can apply for a loan that covers the entire cost of the home without a down payment, as long as credit and income qualifications are met.

It’s important to note that while there are no borrowing limits with a full entitlement, there's a cap on the VA's guaranty which covers up to 25% of the loan amount and this is subject to county loan limits if you have partial entitlement. These limits vary depending on the location of the property you're planning to buy.

VA loan interest rates

If you're looking at current mortgage rates, a VA loan is likely standing out as the rates are very competitive. Lower VA loan rates mean you end up paying less per month and over the life of the loan.

VA loan down payments

None required. That's right—zero, zip, zilch. Not surprisingly, this removes a major barrier to homeownership for many, as saving large sums for a down payment can delay or entirely prevent some veterans from owning a home. Eliminating this upfront cost makes it much easier for service members to start the home buying process.

VA loan mortgage insurance

VA mortgage loans do not have private mortgage insurance, unlike conventional mortgages which require private mortgage insurance (PMI) unless you put 20% down.

VA loan credit score

While the VA itself doesn’t dictate credit requirements, lenders who offer VA loans typically look for a credit score of 620 or higher. The takeaway: you don’t need perfect credit to be deemed financially responsible. Your military service, professional resume and payment history matter as well.

VA loan debt-to-income ratio (DTI)

For a VA loan, it's preferable to have a DTI of 41% or less. However, there’s some leeway here depending on the lender. So, if you have some existing debt, be sure to talk to a lender about your options.

To be eligible for a VA loan, you need to show a stable and dependable income that can comfortably cover your monthly expenses, including the mortgage payments. Also, the U.S. Department of Veterans Affairs sets certain residual income guidelines that vary by region, loan amount and family size. Residual income is the amount remaining after all your bills are paid. While the VA uses these residual income figures as a guideline, they alone do not determine your eligibility for a VA loan.

VA home loans are uniquely designed for veterans with features that make it easier to enter the housing market and benefit from homeownership.

FHA vs. VA loans

Compared to FHA loans, your VA loan interest rate will typically win out, but that's not all. Here's a quick-reference view to help clarify:

This is the easy part! Here’s a step-by-step guide:

1. Confirm your eligibility: First, ensure you meet the eligibility requirements for a VA loan. This typically involves having served a certain amount of time in the military, reserves or National Guard, or being a surviving spouse of someone who has.
2. Obtain your certificate of eligibility (COE): You'll need a COE to prove to lenders that you qualify for a VA loan. You can apply for a COE through the VA’s eBenefits portal or by mail, or your lender may be able to obtain it for you.
3. Choose a VA-approved lender: Not all lenders handle VA loans, so make sure you choose one that is experienced with the processes. Citi, for example, is a recognized VA loan lender, offering expertise in managing these specific types of loans efficiently.
4. Get pre-approved: Opting for programs like the Citi SureStart® Pre-Approval can be incredibly helpful in streamlining the home buying process. This pre-approval service not only helps you understand your budget, but also provides a strong commitment to lend while giving you a good gage of how much home you can afford.
5. Find a home and sign a purchase agreement: Work with a real estate agent to find a home that meets your needs and budget. Once you find a home, you’ll sign a purchase agreement contingent on approval of your VA loan.
6. Complete the loan application: Fill out your lender’s loan application and provide any additional documentation they require.
7. VA appraisal and underwriting: Once your application is submitted, the VA will order an appraisal of the property to ensure it meets their guidelines. Meanwhile, the lender will underwrite the loan, reviewing all your documentation to ensure you meet all the qualifications.
8. Close on your loan: If the appraisal is successful and underwriting goes smoothly, you’ll close on the loan. This involves reviewing and signing all the paperwork, paying any necessary fees and finalizing the details of your mortgage.

Ready to chat through your options?