The Department of Veterans Affairs has been helping veterans, and their families qualify for home loans since 1944. VA loans are not issued by the VA but rather through banks and lenders. However, the VA does guarantee each qualified VA loan.
There are many benefits of VA loans compared to conventional mortgages. For example, applicants can apply for a VA mortgage with no down payment, and you don’t have to purchase private mortgage insurance (PMI).
You’ll likely get a lower interest rate than you would with a conventional mortgage. And you can qualify for a VA mortgage even if you only have fair credit.
Best VA Mortgage Lenders of December 2022
Even though you’ll get a discount with the VA loan program, it’s still important to shop around to find the best VA mortgage lender. In theory, you could apply for a VA loan with any mortgage lender, but some are better than others.
You should choose the lender that will give you the lowest VA loan rates and the most flexible repayment terms. Here are the eleven best VA mortgage lenders:
Veterans First Mortgage has been around since 1985 and has worked with more than 175,000 military and non-military customers. The company provides personalized service and competitive VA loan products, and its focus has always been on helping veterans.
At least 90% of the Veteran First’s loan originations are VA purchase loans, so the company has the experience to work with veterans. Veterans will have to pay a VA funding fee, typically between 0.5% and 3.3%. However, most borrowers choose to roll it into the loan amount.
Veterans First requires a minimum credit score of 600 to apply. The company doesn’t publish its APR range on its website, so you’ll have to apply to see what you qualify for. And the company does charge a 1% origination fee.
Navy Federal Credit Union was founded in 1933 and is the largest credit union in the world, with more than eight million members. To become a member, you must be a veteran, an active member of the military, or employed with the U.S. Department of Defense.
In addition to VA loans, the credit union offers a wide range of affordable loan and banking products designed for military service members. The APR for VA loans starts as low as 3.591%. And Navy Federal will even match you with a top-performing real estate agent in your area.
Navy Federal Credit Union doesn’t publish its credit score requirements. However, it is willing to consider other forms of credit history, such as income and payment history.
Veterans United Home Loans was named the best VA lender for 2018 by the Department of Veteran Affairs. It’s one of the fastest-growing VA mortgage lenders in the country, and no other bank focuses on veterans the same way they do.
Veterans United offers every type of VA mortgage that exists including, fixed and adjustable loans, IRRRL loans, cash-out refinance loans, and jumbo loans. Additionally, 15-year mortgages start at 3.701% APR, and 30-year mortgages start at 3.624% APR.
You will need a credit score of 620 or higher to apply. But if your credit score falls below this, Veterans United provides a credit repair consultant to help veterans improve their credit score under the Lighthouse Program.
Veterans interested in applying can have a free VA loan consultation either online or in person. And they offer 24/7 customer service, so someone is always available to answer your questions.
loanDepot is among the largest non-bank lenders in the country and offers various loan products, including VA loans. The lender is an ideal choice if you’re short on time, and you need to close a VA loan fast. loanDepot’s Mello Smartloan digital application eliminates paperwork to reduce the closing time by 17 days.
A minimum credit score of 620 is required for a loan, but loanDepot doesn’t publish the APR, so you have to apply to find out what you qualify for. However, they will waive the refinancing fee for any existing customers.
USAA offers banking and home loans to military members and their families. Over the past five years, USAA issued more than 155,000 VA loans. They offer competitive rates starting at 3.791% APR for a 30-year VA mortgage.
USAA has a 5/1 adjustable-rate VA mortgage product that is particularly attractive to those on active duty who have to move every few years.
For the first five years, the rate will be around 3.922% APR then it will adjust to market interest rates. However, most people expect that interest rates will be higher in five years than they are today.
If you’re a first-time homebuyer who can’t qualify for a VA mortgage, USAA offers loans with a required down payment as low as 3%. The bank also offers several competitively priced insurance products.
Quicken Loans offers several VA mortgage options. The company is known for its quick-response customer service and speedy online mortgage application process, called Rocket Mortgage. Quicken can provide instant verification for most applicants, thanks to their online loan application process.
A 30-year VA loan comes with rates starting at 3.877% APR. Borrowers will need a credit score of 620 or higher to qualify and a down payment of at least 3%.
Quicken Loans is a viable option but keep in mind that they don’t have the same experience working with veterans as other VA mortgage lenders on this list.
You may not have heard of New American Funding, but they are one of the best options for veterans with poor credit. Unlike many online lenders, New American uses an actual person to review the VA loan and underwriting.
So if your credit score is lower than expected, they will consider other nontraditional credit factors when reviewing your loan application. For VA loans, New American Funding will accept applicants with credit scores as low as 580.
New American Funding doesn’t publish their VA loan rates, so you’ll have to apply online to see what you qualify for. However, they do require a minimum down payment of 3%.
PenFed Credit Union is a global credit union founded in 1933 and works with military and non-military customers. PenFed specializes in providing financial services to military forces and their families.
PenFed requires a minimum credit score of 650 but offers a $500 to $2,500 credit to help with closing costs. PenFed has no lender fees, but charges a funding fee of 1.4% to 2.3% of the loan amount. However, you may be able to roll it into the VA loan.
The company doesn’t publish its exact mortgage rates on its website but offers 15-year fixed and 30-year fixed mortgages at competitive rates. It’s also possible to get a loan with no down payment.
PenFed provides financial assistance and resources to veterans and service members through the PenFed Foundation. It also caters to the needs of wounded warriors who need continued treatment.
North American Savings Bank’s (NASB) VA home loan program has helped more than 38,000 veterans and military families realize their dream of owning a home in the past ten years. So far, the VA loan lender has closed more than $12.8 billion in VA home loans.
NASB assigns a dedicated loan officer to each applicant, and they underwrite new VA loans, refinance, and even jumbo loans.
The company doesn’t charge an origination fee and is open to working with veterans with bad credit to help them secure a home loan.
NASB doesn’t publish interest rates, but they use in-house processing and underwriting to accelerate the loan process. Most of NASB’s loan officers are veterans themselves and have in-depth insights into the VA loan process.
Guild Mortgage is a VA-approved lender that caters to military and non-military clients. This lender is an excellent option if you struggle with lower credit scores. For example, veterans with a minimum credit score of 580 are eligible for a VA loan from this lender known for its fast closing speed and no down payment.
Under the Homebuyer Express program, the company offers a 17-day closing guarantee, ideal for active service members short on time. In addition, the lender supports in-person and online mortgage applications.
Founded in 1998, NewDay USA is a veteran-focused lender specializing in VA home loans. To date, the lender has helped more than 75,000 veteran families buy homes.
NewDay offers fixed-rate mortgages with 15-year or 30-year terms as well as mortgage refinancing while providing additional benefits.
You can save up to $3,000 in mortgage payments per year through the VA Streamline Refinance. The company offers a cash-out refinance equivalent to 100% of your home’s value.
NewDay USA does not openly advertise its mortgage rates, so you would have to apply to find out. It’s also unclear if NewDay charges an origination fee as they don’t reveal their lender fees upfront.
What are VA loans?
VA loans are mortgage products backed by the Department of Veterans Affairs. These loans are for service members, veterans, and their surviving spouses. VA loans allow them to buy homes with little or no money down and avoid private mortgage insurance. In addition, VA loans feature some of the most competitive interest rates on the market.
Although conventional mortgage lenders issue VA loans, they’re guaranteed by the federal government. Unlike standard loans, VA loans provide 100% financing when buying a home. Eligible borrowers can use the VA loan to purchase or build a house, renovate a house, or refinance their mortgage.
The VA doesn’t offer mortgage financing directly, but it sets the qualifying standards and dictates mortgage terms. Qualified borrowers can then secure a mortgage from private lenders such as mortgage companies, credit unions, and banks.
There are several types of VA loans. They’re classified as non-conforming loans due to their flexible credit requirements, lower interest rates, and down payment waivers. However, VA loans carry no prepayment penalties. The VA may also provide some assistance if you’re unable to keep up with your monthly payments in certain situations.
Who qualifies for a VA loan?
VA loans are available to veterans with an honorable discharge and active duty service members who meet the minimum requirements. Surviving spouses of veterans who died in active service are also eligible for VA loans.
To be eligible for a VA loan, you must meet three criteria:
- Meet the VA’s basic service requirements
- Obtain a valid Certificate of Eligibility
- Meet a lender’s underwriting requirements
Department of Affairs’ Basic Service Requirements
You’re eligible for a VA loan if you meet one or more of these requirements:
- More than 90 days of continuous active duty during wartime
- More than six months of active service during peacetime
- Six years of service in the National Guard or Reserves
- You’re a surviving spouse of a veteran who died in the line of duty or from a service-related disability
Have a Valid Certificate of Eligibility
You need the above qualifications to secure a Certificate of Eligibility (COE). The certificate proves that you’re eligible for VA financing and provides details about your VA entitlement.
First-time borrowers have full entitlement, allowing them to take out a VA loan without a down payment. It also guarantees the lender that the VA will pay 25% of any loan amount over $144,000 if you default.
Meet a Lender’s Credit Score and Income Requirements
When issuing VA loans, most VA lenders set a minimum credit score requirement of 620 to 640. They will also look at your income level and debt-to-income ratio to gauge your ability to repay the loan. Your income level primarily determines the amount of money you can borrow.
What credit score do you need to qualify for a VA loan?
Most VA loan lenders require a minimum credit score of at least 620 to be eligible for a VA loan, while others prefer to see it closer to 640.
Each of the three leading credit agencies, Equifax, Experian, and TransUnion, use the FICO index to calculate your credit score. However, subtle differences between the credit bureaus may lead to variations in the final credit score. For example, if your credit scores from the three bureaus are 653, 640, and 633, the VA lender will discard the highest and the lowest and use the middle credit score.
For this reason, you should get a credit report from each of the three agencies when applying for a VA loan. Sometimes credit reports contain errors that lower your credit score. Rectifying these errors can lead to a significant boost that could push you over the cut-off point. This would help you secure a better interest rate.
How to Apply for a VA Loan
Although applying for a VA loan may seem daunting at first, it becomes relatively straightforward once you understand the process. Here’s a simple six-step guide to the VA application process.
1. Determine Eligibility
National Guard and Reserves, current active duty, and veterans are eligible for a VA loan. They must meet the required active duty dates, minimum active duty service, and wartime periods, as well as obtain a Certificate of Eligibility.
You can apply directly through eBenefits at VA or request it through the mail by filling out form 26-18880 and attaching the supporting service documents. Your lender may also be able to apply on your behalf.
2. Choose a VA-Approved Lender
Not all lenders make a great fit when looking for VA mortgages. VA loans can only be originated by lenders on the Department of Veterans Affairs’ shortlist.
Secondly, some mortgage lenders specialize in conventional loans, while others are dedicated almost exclusively to the VA home loan program. A VA specialty lender is more knowledgeable about the loan process, delivering a better experience most likely.
3. Get a Mortgage Pre-approval
Mortgage pre-qualification is necessary when buying a home with a VA loan. It lays the groundwork for a smooth application process while eliminating potential surprises down the road. During pre-qualification, you’ll speak with your potential lender about your credit history, income, marital status, employment, and other crucial factors.
The pre-qualification process may offer insights into what you can do to increase your chances of approval. Pre-qualification letters give you an idea of how much you may be able to borrow, which can help you with your house-hunting efforts.
Even though the letter doesn’t guarantee loan approval, it serves as a guideline to let you know where you stand. It also shows that you are serious and have already started the process with a lender when making an offer on a home. Of course, the lender will have to verify all the information you provided before processing the loan.
4. Find Your Ideal House
House hunting is the most exciting step of your VA loan application since it allows you to find your dream home. A pre-qualification letter lets you shop strictly within your price range to save time and avoid disappointment later. Any real estate professional can help you with this step. However, it’s best to work with someone familiar with the VA mortgage loan process.
The VA allows the seller to absorb specific fees and costs. A seasoned VA loan agent can help you negotiate these fees and potentially save some money. Once you agree, you can sign a purchase agreement and proceed with the VA loan application.
5. VA Appraisal
After submitting your signed purchase contract to your lender, they’ll request the VA to appraise the home. Again, you need a VA-certified appraiser since they’re familiar with the standards required for VA financing. A VA appraiser will ensure the house is valued correctly and corresponds to its current market value.
The appraiser will inspect the home to ensure it passes the VA minimum property requirements (VA MPR). However, a VA appraisal doesn’t negate a proper home inspection. Unlike an appraisal, a home inspection checks for defects, code violations, and property conditions.
The VA grants its appraisers ten days to complete the appraisal process barring any extenuating circumstances. Then, if the property is up to par, and you meet all the loan requirements, you can proceed with the loan approval process.
6. Close the Sale
After the underwriter approves your loan, you can close the loan and move into your new home. The seller legally transfers the property over to you during the closing process. You’ll need to sign documents confirming that you understand and agree with the loan’s terms and conditions.
You’ll also need to pay the closing costs, if required, and provide proof of homeowner’s insurance. You can take possession of the house immediately after signing all the closing documents.
What are the down payment requirements for a VA home loan?
VA loans don’t require a down payment because they’re guaranteed by the government. If you don’t have the funds to put down on your loan, you don’t need to worry. That being said, it can help your overall financing if you do make a down payment. Doing so will reduce the total cost of your loan, as whatever you put down will not have to be paid back in interest.
You’ll also have to pay a down payment funding fee if your down payment is less than 20% of your VA loan. This fee varies depending on two factors: your down payment and whether you’ve had a VA loan in the past.
This fee can be paid upfront or included in the total value of your loan. Some borrowers, including Purple Heart recipients and surviving spouses, are exempt from the VA funding fee. So, make sure to check that with your VA mortgage lender.
There are also down payment assistance programs that you can apply for if you’d like to afford a minimum down payment and help reduce your total loan costs.
Pros and Cons of VA Loans
VA loans offer several benefits in comparison to traditional private loans, but there are also potential downsides to consider. Finding the best VA home loan is also easier when you’ve got a full picture of the pros and cons.
- Lower interest rates compared to a traditional mortgage.
- No minimum down payment.
- No mortgage insurance required.
- Lower minimum credit score requirements.
- Lower closing costs compared to a traditional mortgage.
- VA funding fee (higher for multiple VA borrowers).
- Requires home appraisal and inspection.
- It can’t be used for investment or vacation properties.
- Some sellers may be resistant to VA funding.
VA Loan Rates
VA loans typically have much lower interest rates in comparison to traditional mortgage loans. The reason mortgage lenders can offer these competitive interest rates for VA loans is because they’re backed by the government. This means VA lenders don’t have to take on as much risk as they would with regular borrowers.
Keep in mind that interest rates are still set by private mortgage lenders and are subject to market fluctuations. VA loan rates will also vary depending on the loan type and term, your credit score, debt-to-income ratio and your down payment, if you do put money down. This all means that it’s important for you to shop around before choosing a mortgage lender.
Finding the best VA loan lenders available to you, and therefore the best mortgage rates, might take some time and research. While some online lenders will publish their rates, many VA mortgage lenders don’t. Let’s look at some tips below to help you source the best VA loan for you.
Tips for Finding the Best VA Loans
It’s true that VA loans can provide numerous benefits in comparison to conventional loans. However, finding the best VA mortgage lender for your financial situation might take some time and consideration. Before you proceed with any mortgage lender, review all of your loan options so you can be certain you’re making the best choice.
Not all lenders offer VA loans, so the first step is to seek those who offer VA financing. Then it’s a matter of finding out about loan requirements, and getting a clear and up-to-date picture of your financial situation.
You’ll want to understand exactly what you can afford, and how your credit score looks, before you start sounding out VA loan lenders. You’ll also need to decide how much of your monthly budget you can afford to dedicate towards your loan.
To get a basic understanding of the VA loan products available, request quotes from several VA mortgage lenders. You can request a quote online. It requires information about the loan amount and repayment terms, as well as your credit score.
VA loan rate quotes usually require a soft credit check, so it won’t affect your credit score. You can also use a quote from one lender to potentially negotiate a lower fee with another lender. Gathering as much information as you can will help you find the best VA loan.
Alternatives to VA Loans
If you don’t qualify for a VA loan, or if you can’t find a VA loan lender with the right financing options, there are alternatives to consider. Even if you do qualify for a VA loan, you might want to exhaust all other possibilities by looking into alternative loan options.
- Conventional loans: Conventional mortgage loans don’t come with an additional funding fee like a VA loan does, and you can use them on investment properties and second homes, or holiday properties. Conventional loans also have loan limits identical to those for VA loans, but they are less accommodating than VA loans when it comes to your credit score.
- FHA loans: Loans from the Federal Housing Agency are government-backed, like VA loans. They also don’t come with early payment penalties. FHA loans are based on occupancy, however, meaning they can’t be used to mortgage secondary homes and investment properties.
- USDA loans: USDA loans are similar to VA loans in that they don’t require a down payment. However, these loans are only available to those living in designated rural areas. There are also specific qualifying restrictions on USDA loans, including occupancy and low income requirements. Homes which are financed by USDA loans also must be single-family properties.
How do I get started?
If you’re interested in applying for a VA loan, you’ll need to find a VA mortgage lender and get prequalified first. Once your VA lender has verified your income and financial information, you’ll receive your pre-approval letter.
Now that you know what you can afford, you can begin looking for houses. Once you find the home that’s right for you, you can put in an offer and start the negotiation process. It’s a good idea to partner with a real estate agent who knows the ins and outs of VA loans.
When you’re under contract, the VA will appraise your property. If everything looks good, you are in the clear to close on your new home.