The Yahoo view:Newrez’s strongest features are its 45-day rate lock program and 0.50% closing cost discount if you use a real estate agent through the company. However, its customer satisfaction ratings are well below average — among both lenders and mortgage servicers.
Newrez is a national mortgage company that originates loans in all 50 states and several U.S. territories. The lender offers a variety of types of mortgage loans, including conventional, FHA, VA, and home equity loans, as well as purchase, refinance, and investment property mortgages.
Unfortunately, Newrez isn’t known for its customer service. According to J.D. Power, the company ranks last in customer satisfaction among mortgage participating originators in its 2023 survey and below average in mortgage servicing. (Its servicing arm, Shellpoint Mortgage, also has a class action lawsuit currently filed against it regarding illegal inspection fees. This case is still ongoing, though.)
Read more: Best mortgage lenders for first-time home buyers
In this article:
Key benefits
Newrez offers a wide variety of loan products, including conventional, FHA, and VA loans, as well as home equity loans and investment property loans.
Buyers can get a closing cost credit worth 0.50% of their home’s purchase price by using a Newrez partner real estate agent.
The lender allows for 45-day rate locks, and if rates drop, you can re-lock at the lower rate for no extra cost.
Need to know
Newrez doesn’t offer USDA loans, jumbo loans, or HELOCs.
The lender has no physical branches. You can apply online or call a loan officer over the phone to start your application.
The company ranks below average in customer satisfaction, both in mortgage servicing and origination.
According to government data, conventional loans account for the bulk of Newrez’s loan volume, followed by FHA loans.
The lender recently acquired Caliber Home Loans. Shellpoint Mortgage Servicing is also a part of the Newrez organization.
Loan types offered
Note: You cannot get a USDA loan directly from Newrez — it only offers USDA loans through its wholesale lending business.
Newrez mortgages for FHA loan home buyers
Newrez offers FHA loans for both purchasing a home and refinancing an existing mortgage. In fact, FHA loans account for a little over a quarter of the company’s total mortgage origination volume, according to 2023 Home Mortgage Disclosure Act data. FHA loans are Newrez’s second-most popular mortgage product behind conventional loans.
Learn more: Best FHA lenders
Newrez mortgages for VA loan home buyers
For veterans, military members, and their families, Newrez also offers VA loans — a type of mortgage backed by the U.S. Department of Veterans Affairs.
Newrez offers both VA purchase loans and VA refinances, including IRRRLs — Interest Rate Reduction Refinance Loans. These are also known as VA streamline refinance loans, and they allow you to refinance easily from one VA loan to another (and with less paperwork). In total, VA loans account for about 12% of all Newrez’s mortgage volume.
Newrez for home equity lending
For homeowners looking to take cash out of their houses, Newrez offers home equity loans, which allow you to borrow from your home equity and get a lump-sum payment in return. These are a type of second mortgage and come with a second monthly payment — in addition to the payment on your first mortgage.
Newrez also offers cash-out refinancing, an alternative way to access your home equity. With this type of mortgage refinance, you replace your current mortgage loan with a larger one and get the difference back in cash. (Keep in mind: It also replaces your loan’s term and interest rate, so this might not be wise if you have an ultra-low, pandemic-era interest rate on your current loan.)
Newrez does not have home equity lines of credit (HELOCs).
Newrez mortgage rates
Newrez is not very up-front with its interest rates. Its website has no advertised or sample rates available, and to get a rate quote, you’ll need to fill out an online application with the lender or talk to a loan officer over the phone. This is the case for all Newrez loan types and programs.
Read more: 5 ways to get the lowest mortgage rates possible
Applying for a mortgage with Newrez
You can apply for a Newrez mortgage online using the lender’s digital application. This goes for purchase loans, refinances, and home equity loans. When applying, you’ll need to provide personal information, details about the home you’re purchasing, your down payment amount, and other financial details.
Newrez offers a wide variety of online tools and resources for borrowers. You’ll find the following types of mortgage calculators:
Monthly mortgage payment calculator
Refinance calculator that shows how much you could save by refinancing
Loan amount calculator to reveal how much house you can afford
Rent vs. buy comparison
Loan term comparison
Newrez also has a deep library of resources, FAQs, and blog posts.
Dig deeper: Use Yahoo Finance’s free mortgage payment calculator
How Newrez compares to other mortgage lenders
Newrez mortgages vs. Freedom Mortgage
Newrez and Freedom Mortgage are both national mortgage lenders, but the two vary slightly in product offerings. While Newrez offers home equity loans and interest-only options, Freedom does not. However, it does have USDA mortgages for rural home buyers — something Newrez lacks.
Both companies rank low in customer satisfaction, and neither website shows advertised or sample interest rates to compare. You can apply online with both mortgage lenders, as neither has physical branch locations.
Freedom Mortgage review
Newrez mortgages vs. Pennymac mortgages
Pennymac offers all the same mortgage options as Newrez, with the addition of USDA and jumbo loans. Pennymac rates much higher in customer satisfaction and offers an interest rate buydown option, whereas Newrez does not. Pennymac is also more up-front about its mortgage rates, offering sample rates right on its homepage.
If you’re interested in a type of mortgage loan both lenders offer, try applying for preapproval with both to see which offers the better deal.
Pennymac mortgage review
Newrez mortgage FAQs
Is Newrez a legitimate mortgage company?
Yes, Newrez is a legitimate mortgage company that originates and services mortgage loans throughout the U.S. The Better Business Bureau has accredited the company, giving it an A+ rating.
What is the lawsuit against Newrez mortgage?
Newrez currently faces a class action lawsuit in Maryland stemming from claims that Newrez charged illegal inspection fees to homebuyers in the state. The suit was technically filed against Shellpoint Mortgage, a subsidiary of Newrez, and it has not been resolved yet.
What is the old name for Newrez?
Newrez used to be known as New Penn Financial. The company also acquired Caliber Home Loans in 2021; its loans have since been rolled into the Newrez business.
How are Newrez mortgage reviews?
Newrez mortgage reviews tend to be low. The company ranks low in J.D. Power’s customer satisfaction rankings and has 1.17 stars out of 5 with the Better Business Bureau. The company also has 1.2-star rating on Trustpilot. The majority of customers on the site gave Newrez just one star.
If you have an existing VA loan, you can refinance it to get a better interest rate, change your loan term or tap into your home equity.
To qualify for a VA mortgage refinance, you’ll need to meet specific service, income and credit score guidelines.
The two primary VA loan refinance options are Interest Rate Reduction Refinance Loans (IRRLs) and VA cash-out refinances.
Refinancing your current mortgage into a VA loan can be a smart move if you’re an active-duty military member, a veteran or an eligible spouse. Fortunately, qualifying to refinance to a VA loan isn’t overly difficult, provided you meet the military service requirement and lender criteria.
Here’s everything you need to know about VA loan refinancing: What it is and how it works.
What is VA loan refinancing?
A VA loan or mortgage refinance is a home loan product backed by the Department of Veterans Affairs (VA). It lets you swap your current loan for a new one, but with different terms. Depending on the type of loan you select, you may be able to get a lower interest rate, change the loan term or convert your home equity into cash.
In addition, if you originally took out an adjustable-rate mortgage (ARM) and want more predictable monthly payments, you can switch to a VA fixed-rate mortgage.
Types of VA loan refinancing
There are two main options available to you when you choose to refinance with a VA loan:
Interest Rate Reduction Refinance Loan (IRRRL): Often called a VA streamline refinance, an IRRRL is available to current VA loan-holding homeowners looking to secure a lower interest rate.
VA cash-out refinance: Lets any mortgage-holder swap out a current home loan with a new one and tap into the home equity they’ve built up.
IRRRL vs. VA cash-out refinance
IRRRL
VA cash-out refinance
Primary Purpose
To secure a lower interest rate or switch from an ARM to a fixed-rate mortgage
To tap into your home equity and convert it into cash
Property Type
Any residence: primary, vacation home, etc. (if previously occupied)
Primary residence
Requirements
No 30-day late payments within the last 12 months (select lenders)
Credit and income criteria must be met
Home appraisal by the lender
Closing Costs
Can be rolled into the loan or paid by the lender
Must be paid upfront by borrower
Loan Restrictions
Limited to VA-backed home loans
Can be used for conventional and VA-backed loans
Who qualifies for a VA mortgage refinance?
As the name implies, VA loan refinancing is available to current and former members of the U.S. military. More specifically, here’s what you’ll need to qualify for VA refinance loans:
Service: Eligibility for a VA home loan typically requires 90 days of active-duty military service during a named conflict, six years in the National Guard or Reserves, or 181 consecutive days of active duty in peacetime. Veterans must have an honorable discharge, though exceptions exist. You may also qualify if your spouse died in the line of duty or due to a service-related disability. VA loans also require a Certificate of Eligibility (COE) verifying military service, obtained through your lender or directly through the Department of Veteran Affairs.
Income: Borrowers also need to show sufficient income to repay their loans, with a debt-to-income (DTI) ratio typically capped at 41 percent.
Credit score: While the VA doesn’t set a minimum credit score, most lenders look for at least 620 — except for the IRRRL, which often doesn’t require underwriting).
Property type: Property purchased with a VA loan must be your primary residence, not a second home or rental property.
Timing: You should occupy the new home within 60 days of closing, though extensions up to 12 months are possible under certain conditions. Moving in beyond 12 months is rarely considered acceptable by the VA.
How to refinance into a VA loan
It is relatively simple to refinance into a VA loan. However, the two types require slightly different steps to obtain.
Interest Rate Reduction Refinance Loan (IRRRL)
You can use the Interest Rate Reduction Refinance Loan (IRRRL) — aka the VA streamline refinance — to exchange an existing VA loan for a new VA loan with a lower interest rate. Many homeowners also use it to switch from their VA adjustable-rate mortgage (ARM) to a fixed-rate mortgage.
Other benefits to consider:
This loan is usually available without a home appraisal or any underwriting.
You’re not required to pay closing costs upfront.
The funding fee is lower than with VA new-purchase and construction loans.
In terms of costs, you’ll pay a 0.5 percent fee to take out an IRRRL along with the lender’s closing costs, which can be rolled into the new loan. Some lenders also offer to pay the closing costs for you in exchange for a higher interest rate.
However, you can only use the VA streamline mortgage if your new interest rate is lower than your current rate. That means you may have to wait for interest rates to drop before you can pull the trigger on a VA IRRRL. There’s one exception: If you are switching from a VA ARM loan to a fixed-rate loan, then the new loan’s rate may be higher than the ARM rate.
Also, you can only borrow up to the same amount as your existing mortgage. This means you can’t get an extra amount of money, as people often do when refinancing. For that, you’ll need a VA cash-out refinance.
VA cash-out refinance
A VA cash-out refinance loan allows current homeowners to refinance their mortgages and take out some or all of their accrued equity. You can use this type of loan to refinance either an existing VA loan or a conventional mortgage, and the VA will guarantee loans worth up to 100 percent of the home’s value. Like other VA loans, this loan requires you to meet military service requirements and have a COE.
It can be beneficial if:
You want to switch from a conventional to a VA-backed loan.
You want to make home improvements that will increase your property value.
You want to pay off expensive debt and save a bundle in interest.
If you’re considering this option, have a clear goal in mind for the funds, and be realistic about your habits. If you intend to use the cash to pay off credit cards, for example, you’ll need to be sure you won’t accumulate an unmanageable balance again in the future.
If it’s your first VA home loan, the funding fee (as of April 2024) is 2.15 percent. But if you’ve already used your VA loan benefit before, the funding fee increases to 3.3 percent. You’ll also be responsible for closing costs.
Benefits of refinancing to a VA loan
The benefits of refinancing with a VA loan are plentiful, which is why VA home loans are so popular among those who can qualify. Here are the other key advantages of refinancing with a VA loan:
No mortgage insurance needed: VA home loans don’t require mortgage insurance, even if you don’t put money down.
No cash upfront: No down payment is needed, though closing costs are still required for refinance loans.
Minimal upfront costs: VA loans typically charge a funding fee that the borrower pays upfront. It can be wrapped into the closing costs, but this means paying more interest over time. The fee may be waived if you have a service-related disability or if you’re the spouse of a deceased veteran.
Save on interest: VA home loan rates are typically competitive, potentially saving you money compared to conventional loans.
Easier to get: Qualifying is easier due to the VA’s more flexible credit and income criteria, though cash-out refinance loans have stricter eligibility rules.
No prepayment penalties: There are no penalties for paying off your VA loan early.
More protectable payments: If you prefer a consistent monthly payment, you can switch from an adjustable-rate to a fixed-rate VA mortgage.
Should you refinance into a VA loan?
It depends on your unique financial situation. VA loans come with various perks that could make them the better choice. You’ll likely get a lower interest rate than you would with other refinancing options and more affordable closing costs. Plus, you won’t pay mortgage insurance if you refinance into a VA loan. In fact, you might not need to make a down payment at all.
If you already have a VA loan you want to refinance, an IRRRL could even allow you to switch to a new loan without undergoing underwriting. If you’re looking to access your home equity, a VA cash-out refinance could also be the better option, as you could be eligible to pull out up to 100 percent of the appraised value of your home.
But there are special expenses (those funding fees) and certain limits. Ultimately, you must consider the costs that come with these loan products to determine if refinancing into a VA-backed loan is a smart financial move.
If you’re thinking about refinancing your VA or conventional mortgage, a VA loan calculator can help you estimate your new monthly payment. While many banks, credit unions and online lenders offer VA loans, stick with specialists in VA lending, as the application can be complicated.
Our list of VA-approved lenders can be a starting point, and talk to military friends or family about their experiences. Remember, it’s the lenders who determine rates and terms, so compare offers before deciding.
*Rates and APYs are subject to change. All information provided here is accurate as of March 28, 2024.
Our writers and editors have invested thousands of hours analyzing and vetting lenders offering VA loans. Through exhaustive research, we’ve come up with a list of the best VA mortgage lenders for military members and their families, including Navy Federal, Rocket Mortgage and Veterans United. Read on for our Best VA loan lender reviews and a comprehensive lending guide on how to find and apply for a VA loan.
Money’s Main Takeaways
VA loans are one of the main benefits the federal government offers to retired and active-duty members of the military
Borrowers can qualify for a VA loan with a lower credit score and 0% down payment compared to conventional loans
There is no private mortgage insurance, but borrowers will be required to pay a funding fee
VA loans offer competitive interest rates compared to other loan options
Our Top Picks for Best VA Loan Lenders of April 2024
Best VA Loan Lenders Reviews
Lowest fees on our list
Non-VA mortgage options that require no down payment
356 branches worldwide
No lender fees
Small number of branches within the U.S.
Membership strictly limited to military members, spouses, family members, veterans and the Department of Defense
Customized rates only offered to members
HIGHLIGHTS
Sample rate
5.750% (6.223% APR) on a 30-year fixed-rate purchase loan of $300,000
Minimum credit score
Unstated, VA recommendation of 620 is suggested
Minimum down payment
0% for qualifying borrowers
Availability
Continental U.S.
Pre-approval time
Approximately 3 business days
Mobile app
Yes
NMLS ID
399807
Why we chose it: A combination of low lender fees, several loan assistance programs and a wide selection of mortgage loans make Navy Federal Credit Union our best VA loan lender overall.
Navy Federal Credit Union offers military families low rates on financial products, such as personal loans, auto loans and credit cards. The credit union’s VA home loan program features a fast pre-approval process and loan options with no down payment. No PMI is required, either. Navy Fed also recently introduced its no-refi rate drop, where you could qualify for an interest rate reduction without going through the refinancing process.
Additionally, Navy Federal’s Shop & Lock feature allows you to lock in your rate for up to 60 days while you shop for a home, plus an additional 60-day lock once you’ve submitted a purchase agreement. Other perks include up to $9,000 cash back for working with a real estate agent at RealtyPlus, the credit union’s real estate service and a rate match guarantee where Navy Federal will match a better rate offered by another lender or give you $1,000 if all qualifying conditions are met.
Membership is required to use Navy Federal’s services. All active duty, retired and veteran service members of all armed forces branches — plus their families, immediate relatives and some household members — are eligible. Membership is also open to Department of Defense civilian personnel. To become a member, you simply open a savings account with a minimum of $5.
Access to your loan information is available 24/7 with the proprietary mobile app
Credit scores as low as 580 accepted
Debt-to-income ratios as high as 60% accepted
No HELOCs offered
No USDA loans offered
No physical locations for in-person service
HIGHLIGHTS
Sample rate
5.99% (6.429% APR) with 2.125 points purchased ($5,843.75) on a purchase loan of $275,000
Minimum credit score
580
Minimum down payment
0% for qualifying borrowers
Availability
All 50 U.S. states
Pre-approval time
10-15 minutes
Mobile app
Yes
NMLS ID
3030
Why we chose it: Rocket Mortgage’s (formerly Quicken Loans) fully online application and closing process, along with its multiple tools for keeping track of your in-process and existing loans make it our pick for best online VA loan lender.
Rocket Mortgage is an online lender that stands out for its relatively seamless online mortgage application process. While the experience may vary depending on each borrower’s situation, Rocket Mortgage’s website and mobile app allow you to submit all of your paperwork digitally and track every step of your loan’s processing.
While you have the option of speaking with a live representative, you can also communicate with Rocket Mortgage through online or mobile messaging.
Although Rocket Mortgage doesn’t have the broadest loan offering, it does work with all the major VA loans (purchase, refinance, IRRRL) and considers credit scores as low as 580 and debt-to-income ratios as high as 60%. Borrowers buying a home through Rocket Homes and financing through Rocket Mortgage could get a 1.25% closing credit, up to a maximum of $10,000.
For more detailed information, read our full review of Rocket Mortgage (Quicken Loans).
Broader selection of veteran-focused loans than competitors
Offers real estate services for veterans
Customer support is available 24/7
No HELOC products offered
Only 26 affiliate branches across 17 states
HIGHLIGHTS
Sample rate
5.875% (6.307% APR) with 1.5630 points purchased ($4,610.85) on a 30-year fixed-rate purchase loan of $295,000
Minimum credit score
600
Minimum down payment
$0 for qualifying borrowers
Availability
All U.S. states
Pre-approval time
Not stated
Mobile app
Yes
NMLS ID
1907
Why we chose it: Veterans United offers more veteran-focused mortgage options than the standard purchase, refinance and streamline products, making it our choice for best VA loan lender for VA loan variety.
Veterans United guarantees more loans than any other VA-approved lender, according to The Department of Veterans Affairs. The VA compiles a list each month of the top lenders, and Veterans United Home Loans hasn’t budged from its number-one spot in more than six months.
In addition to its reasonable qualifying credit score and income requirements, Veterans United offers a wide variety of loan types: purchase, refinance, IRRRL (streamline) VA loans, Jumbo VA loans, VA energy-efficient mortgages and VA cash-out refinance loans.
Jumbo VA loans can be a good option for veterans who no longer have their full VA entitlement, which means that their VA loans have a limit placed on the total amount borrowed (unlike veterans with full entitlement). Energy-efficient mortgages are not common to VA loans and are a good option for anyone looking to add energy-efficient improvements to their new home.
Second-lowest fees of any lender we’ve reviewed
Loan amounts up to $1 million
No PMI insurance required
Alternative or non-traditional credit and income data not considered for loan applications
Funding fee required
HIGHLIGHTS
Sample rate
5.75% (6.024% APR) with 1.125 points purchased on a 30-year fixed-rate purchase loan of $450,000
Minimum credit score
620
Minimum down payment
0% for qualifying borrowers
Availability
All U.S. states
Pre-approval time
Within three business days
Mobile app
Yes
NMLS ID
401822
Why we chose it: PenFed currently offers the lowest mortgage rate for a 30-year fixed-rate loan, which makes it our pick for the best VA loan lender for competitive rates.
When it comes to VA loans and mortgages, PenFed Credit Union stands out for offering some of the lowest rates across the board on conventional, FHA, VA, Jumbo and adjustable-rate mortgages. Eligible borrowers may qualify for zero down payment. Additionally, PenFed doesn’t require borrowers to acquire private mortgage insurance (PMI).
You must be a member of PenFed to use PenFed’s VA loan services, but joining is an easy process: Simply open a savings account at the credit union with a minimum of $5.
For more detailed information, read our full review of Penfed.
Accepts credit scores as low as 600
Variety of mortgage products available
Self-employment and nontraditional income accepted
Physical branches only in Missouri
Other fees apply
HIGHLIGHTS
Sample rate
6.625% (6.864% APR) on a 15-year fixed-rate purchase loan of $300,000
Minimum credit score
600
Minimum down payment
0% for qualifying borrowers
Availability
All U.S. states
Pre-approval time
Not stated
Mobile app
Yes
NMLS ID
400039
Why we chose it: North American Savings Bank is dedicated to servicing customers in the Kansas City, MO area, but it extends its mortgage services to individuals all over the U.S. Notably, NASB works with borrowers with credit scores as low as 600, lower than what other many lenders allow.
No origination fees are charged on VA loans from NASB, but a VA loan funding fee may be required. Many loans don’t require a down payment, either. NASB offers a loan payment calculator on its site where borrowers can see potential VA home loan rate scenarios.
In addition to standard VA loan products (purchase, IRRRL, cash-out refinance), North American Savings Bank offers the widest variety of mortgage options for individuals who are unable to provide “traditional” credit and income data, such as people who are self-employed.
VA Cash-out refinance, IRRRL and Jumbo IRRRL available
Discounts for bundling services (e.g. home and auto insurance)
Variety of discounts through USAA Perks (car rental, travel, shopping)
Requires membership in USAA
No home equity loans or lines of credit
HIGHLIGHTS
Sample rate
6.125% (6.447% APR) with 0.801 points purchased for a fixed-rate purchase loan and 5.875% (6.196% APR) with 0.933 points purchased for a VA Jumbo purchase loan
Minimum credit score
620
Minimum down payment
0% for qualifying borrowers
Availability
All U.S. states
Pre-approval time
Not disclosed
Mobile app
Yes
NMLS ID
401058
Why we chose it: For those looking to refinance their existing VA loan, USAA offers all of the possible options with competitive rates and terms.
USAA stands out as a VA loan refinance leader for offering all the available options: VA Interest Rate Reduction Refinance Loans (IRRRL), VA Jumbo Interest Rate Reduction Loans, VA Cash-Out Refinance Loans and Jumbo VA Cash-Out Refinance Loans. With either cash-out refinance, you can refinance up to 90% of your home’s value. With IRRRLs, you can refinance up to 100%.
However, rates at USAA aren’t the lowest among the lenders in our top picks. Still, the company’s rates are within the typical range for the market and the option to finance your VA funding fee into your total loan amount is available with all four refinance types.
USAA offers additional financial products and services, such as insurance, banking and investing. All of its products are available only to members. Military members, veterans, their spouses, children, and pre-commissioned officers are eligible.
Members also get discounts for bundling (e.g. home and auto insurance) as well as discounts on car rentals, travel packages, home security, moving services, select retailers and more.
*USAA does not disclose the credit score, loan amount or down payment of its advertised rates. To get a better estimate of your potential monthly payment, use the USAA VA Home Loan Mortgage Payment Calculator.
Allows you to compare multiple mortgage lenders’ rates at the same time
Over 1,500 partnered lenders in its network
Offers credit monitoring tools
Limited contact options
Customer support does not address issues with the lender of your choice
Does not service loans
HIGHLIGHTS
Minimum credit score
Varies by lender
Minimum down payment
Varies by lender
Availability
Varies by lender
Pre-approval time
Varies by lender
Mobile app
Yes
NMLS ID
1136
Why we chose it: LendingTree is an online marketplace that allows you to compare rates on multiple products, from mortgages to personal loans and even credit cards, making it our pick for the best marketplace for comparing VA loan rates.
LendingTree stands out from its competition due to its more than 1,500 partnered mortgage lenders and easy-to-use mobile app.
Borrowers can request multiple quotes (up to three at the same time), which include projected rates and closing costs all in one place. It is also free to use and doesn’t impact your credit score.
The only notable downside to LendingTree’s services is that the company is not a loan servicer or originator, meaning that its customer support will not handle most issues that may come up during your loan process.
LendingTree does not provide sample rates for VA loans specifically. However, you can use the online marketplace’s mortgage comparison tool to check potential rates.
For more details read our full review of Lending Tree.
Minimum credit score is 580
“I CAN” loan offers customizable loan terms
Buydown option to lower interest rate for first 1-3 years
No interest rate or APR info publicly available
Must enter contact info to get rate estimates
HIGHLIGHTS
Sample rate
6.250% (6.563% APR) with 3 points purchased on a 30-year fixed-rate for a purchase loan of $726,200
Minimum credit score
580
Minimum down payment
0% for qualifying borrowers
Availability
All 50 U.S. states
Pre-approval time
Within 24 hours
Mobile app
Yes
NMLS ID
6606
Why we chose it: New American Funding is our top pick for low credit score requirements for VA loans. While its 580 minimum credit score requirement is not unique on the list, it has a vast selection of mortgage loans. Beyond the VA Purchase Loan, there’s also a VA Native American Direct Loan, VA Energy Efficient Mortgage, VA Streamline Refinance Loan and VA Cash-Out Refinance.
Notably, it offers what NAF refers to as an “I CAN” loan, which allows you to choose a custom fixed loan term between eight and 30 years. It also offers a “buydown mortgage” option for VA loans, which allows borrowers to reduce the interest rate on their mortgage for the first one to three years of their loan.
To get a quote, you must contact a representative online or by phone, which requires providing personal information — first and last name, email address and phone number.
For more detailed information, read our full review of New American Funding.
Over 400 branches across 48 states
Accepts credit scores as low as 580
Offer specialized mortgages for physicians
No branches in Alaska or West Virginia
Rates not disclosed unless you call or submit an online form requesting a callback
Phone customer service hours (M-F, 8:30 am-5 pm CST) may be too restrictive for some
HIGHLIGHTS
Sample rate
Unavailable
Minimum credit score
580
Minimum down payment
0% for qualifying borrowers
Availability
Licensed in all 50 U.S. states; in-person service available in ll U.S. states except Alaska and West Virginia
Pre-approval time
Undisclosed
Mobile app
Yes
NMLS ID
2289
Why we chose it: Fairway Independent Mortgage’s presence in 48 out of 50 U.S. states makes it our top pick for in-person mortgage loan servicing.
Fairway Independent Mortgage is notable for its many branches across all but two U.S. states (Alaska and West Virginia), making it an ideal choice for individuals who prefer in-person service. The company offers VA mortgage loans with 100% financing if you have full VA entitlement.
A down payment will be required if you don’t have full VA entitlement or the loan exceeds the VA county limits. Like other VA loan lenders, Fairway Independent Mortgage also considers factors such as credit score and income when determining loan terms.
Fairway also offers a broad range of mortgage products which can be helpful for those who are unable to qualify for a VA loan. Among these loan products are specialized physician loans aimed at medical professionals still working through repaying their student loans.
For more detailed information, read our full review of Fairway Independent.
Ads by Money. We may be compensated if you click this ad.Ad
Other VA loan lenders we considered
While there are many mortgage lenders with outstanding products and features, they don’t necessarily have everything that could make them one of our top picks.
We reviewed the following lenders, and while they meet some of our criteria for “Best VA home loan lenders” (low rates, VA loan experience, good customer service), they ultimately didn’t make the cut.
Freedom Mortgage
550 credit score minimum is the lowest on our list
Fully online loan process
Variety of calculators and educational resources on their site
Rates are only provided by calling for an estimate or signing up for online alerts
High number of CFPB complaints
Does not offer HELOCs
Why Freedom Mortgage didn’t make the cut: The lender has over 2,800 complaints lodged with the Consumer Financial Protection Bureau since March 2021. The Better Business Bureau has received over 1,200 complaints about the lender in the last three years and its accreditation was revoked.
Freedom Mortgage is a fully online lender that offers standard mortgage products such as conventional purchase and refinance loans, FHA, VA and USDA loans. What makes it stand out is its credit score requirement of 550 for VA loans, which is the lowest of any lender we considered.
Veterans First
Fully online loan process, helpful for military members deployed overseas
Educational resources
Specializes in VA loans
Higher credit score requirements than any lenders we’ve reviewed (mid-600s)
Offers no home equity loans
No rate information on its website
Why Veterans First didn’t make the cut: The higher-than-average credit score requirement (mid-600s) was a deciding factor in keeping it out of our top list.
Thanks to its fully online mortgage process, Veterans First (NMLS ID 449042) is a great choice for military members deployed overseas. Its focus on VA loans also means that the company is better prepared to attend to the specific needs of military members and veterans during the mortgage process.
Paramount Bank
Origination fees waived for VA loans
No prepayment penalties for VA loans
No fee or rate information on its website
No information on loan requirements on its website (minimum credit score, DTI, etc.)
Why Paramount Bank didn’t make the cut: Its general lack of upfront information about rates, fees and credit score requirements kept it out of our top lenders.
Paramount Bank (NMLS ID 551907) waives the lender’s origination fee ($1095) on all of its VA loans, making it an option worth considering. There are no prepayment penalties, either.
Flagstar Bank
Considers credit scores as low as 580 for VA loans
Collaborates with down payment assistance and other special mortgage programs
Large selection of mortgage products for those who don’t qualify for a VA loan
Branches located in only 28 states
$75 annual fee for home equity line of credit (HELOC) loans
High number of complaints with CFPB in the last three years (1,000+)
Why Flagstar Bank didn’t make the cut: Flagstar’s lack of branches in almost half of the U.S. and limited rate and fee information on its website kept it out of our top picks. For more details, read our full review of Flagstar Bank.
Flagstar Bank (NMLS ID 417490) is a notable mortgage lender thanks to its wide variety of mortgage loans offered and its collaboration with several special mortgage programs such as down payment assistance and home loan grants.
PNC
Mortgage rate calculator allows for scenarios with credit scores as low as 620
Individuals with credit scores under 620 may be offered alternative loan options
Mortgage rates are only slightly above average (~0.2%)
Relatively small selection of loan products
No specialized VA loans
Contact information and branch locations are not easy to locate
Why PNC didn’t make the cut: While full details aren’t available without speaking to an agent, PNC’s rate calculator shows rates slightly higher than many of our top picks.
PNC (NMLS ID 446303) has a standard offering of mortgage products, including conventional, FHA, VA, refinance and HELOC loans. PNC only offers a partially online loan application process. You can perform a digital income and asset verification, but you must speak with a loan officer to go over your loan details.
LoanDepot
Strong focus on digital mortgage processing allows a fully online mortgage experience
Over 200 affiliate branches nationwide
Credit score minimums and loan eligibility criteria are not disclosed upfront
Relatively small loan offering
No HELOCs offered
Why LoanDepot didn’t make the cut: Its website doesn’t disclose credit score and other loan eligibility requirements. For more details, read our full review of LoanDepot.
LoanDepot (NMLS ID 174457) is a primarily online mortgage loan lender with several affiliate branches across the U.S. Its loan products include conventional purchase mortgages, FHA, VA, ARM (adjustable-rate) and 203k (FHA home renovation) loans. LoanDepot’s digital income and assets verification tools can significantly speed up the loan approval process in some cases.
Guild Mortgage
Broad mortgage loan offering, including energy-efficient home mortgages
Accepts down payment assistance programs
Services its own loans
Rates are only disclosed after reaching out to Guild
No branches in IN, KY, MI, MN, MS, NY, or WV
Why Guild Mortgage didn’t make the cut: No rate information is publicly available; you must contact Guild for details. For more information, read our full review of Guild Mortgage.
Guild Mortgage (NMLS ID 3274) offers a variety of mortgage options beyond VA loans, including bridge mortgages that can help you sell your current home while shopping for a new one and energy-efficient mortgages.
Guild is also a good choice for people who prefer in-person service, since they have branches in all but seven U.S. states. Notably, Guild services its loans, which is something that not all mortgage loan originators do.
Guaranteed Rate
Housing market research tool available
Home valuation tool available
Credit scores as low as 580 accepted for VA loans
Conventional mortgage rates are higher than average (around 0.7% higher)
Limited offering of VA loan products
Why Guaranteed Rate didn’t make the cut: Its VA loan product offerings are limited.
Guaranteed Rate (NMLS ID 2611) is a mortgage lender that allows borrowers to fully process their loan applications online, from start to finish. Individuals who prefer in-person service can also go to one of its 500+ locations across 46 states.
Movement Mortgage
Offers several high-balance mortgage products (jumbo loans)
Considers credit scores as low as 580 for VA loans
Down payment assistance options available
Streamlined underwriting process that can close loans in as little as a week
Mortgage rates can only be obtained after contacting Movement
No 24/7 customer service
No physical locations
Why Movement Mortgage didn’t make the cut: Rate information isn’t publicly available to potential borrowers; you must contact the company for details. For more information, read our full review of Movement Mortgage.
Movement Mortgage (NMLS ID 39179) is an online mortgage lender that claims to be able to fully close on a loan in under two weeks, though these results will depend on each borrower’s situation. Notably, Movement considers credit scores as low as 580 for VA loan applications, well under the VA’s suggested 620.
Besides its VA loan products, Movement also has several down payment assistance and high-balance mortgage options, which are helpful for individuals looking to purchase in high cost-of-living areas.
NBKC Bank
Provides nationwide mortgage service, despite being a regional bank
Mortgage rate calculator allows credit scores in the 300s
Offer specialized mortgages for pilots
Only four branches split between Kansas and Missouri
Mortgage rates can be as much as 1.5% higher than our top picks
Mortgage rate calculator is not easy to access
Why NBKC Bank didn’t make the cut: Its VA loan rates are a bit higher than those of our top picks. For more details, read our full review of NBKC.
NBKC Bank (NMLS ID 409631) is a Kansas/Missouri regional bank that extends its mortgage services nationwide. While its loan offerings are standard (conventional, FHA, VA), it offers specialty home loans for pilots.
Notably, it is one of the few lenders that allows customers to obtain mortgage rates for credit scores under 500, although you’re not guaranteed results below that threshold. Its mortgage rates are also considerably higher than average (up to 1.5% higher).
VA Loans Guide
A VA loan is a home loan issued by private lenders and backed by the U.S. Department of Veterans Affairs (VA). Read on to learn more about VA home loans, their pros and cons, the associated costs and how to apply.
How does a VA loan work?
VA loans are one of the main benefits the government provides to active duty and retired members of the armed forces. Eligibility will depend on the borrower’s years of service. There are also property requirements that must be met. Read more on VA loans to find full details and see how a VA loan can help you achieve your homeownership goal.
Beyond military service requirements, some VA loan lenders require specific standards of creditworthiness. These details will vary by lender, but can include a credit score of 620 or higher and a debt-to-income ratio of 41% or less. (You can calculate your specific percentage using our debt-to-income ratio calculator.)
VA loans offer two big advantages for qualifying homebuyers. There is no required down payment, and the mortgage rates tend to be lower than those on conventional mortgages or FHA loans. Both of these features make a VA loan a more affordable financing option, especially for first-time homebuyers.
The VA no longer places maximum loan limits, but your VA mortgage lender might. In most U.S. counties, the maximum loan amount for 2024 is $766,550, but it can be as high as $1,149,825 in more expensive areas. Jumbo loans will have a higher limit.
Types of VA loans
The U.S. Department of Veterans Affairs offers four different types of mortgages — VA purchase loan, interest rate reduction refinance loan (IRRRLs), cash-out refinance loan, and Native American direct loan — each with its own set of requirements and limitations. Evaluate all loan options before deciding which best VA mortgage lender suits your needs.
Purchase loan
Purchase loans are used to finance the buying of a primary residence, make energy-efficient upgrades to an existing home or buy property to build a house. They cannot be used to buy investment properties, vacation homes, rental properties or fixer-uppers in need of significant repairs.
To learn more, read our guide on VA purchase loans.
Interest Rate Reduction Refinance Loan (IRRRL)
Designed to refinance an existing VA mortgage, a streamlined refinance can get you a lower interest rate, reduce the loan term, or go from a variable-rate to a fixed-rate mortgage.
Cash-out refinance loan
A VA cash-out refinance allows you to access the equity you’ve built up in your home by applying for a new mortgage with a higher balance. The proceeds of the new loan will pay off your old mortgage and you’ll receive the excess amount in the form of a lump sum payment.
Learn more about how to tap into your home equity with a VA cash-out refinance or read our guide on on how to refinance a VA loan to get more information on refinancing.
Native American Direct Loan (NADL)
NADL is the only VA loan managed and funded directly by the government entity. Veterans who are Native American (or whose spouses are Native American) are eligible for this loan. Borrowers can use this loan to buy, build, or improve a home on federal trust land.
As of this writing, there is no limit to the amount of money that can be borrowed with this program (aside from the limitations imposed by creditworthiness, DTI, and general Fannie Mae/Freddie Mac conforming limits, though borrowers can access higher limits if they choose to make a down payment).
Additional VA-backed loan programs
VA Energy Efficient Mortgage (EEM)
Finance energy efficient home improvements, such as a solar water heater, solar panels, storm doors on windows and furnace efficiency modifications, through an EEM. Ineligible home upgrades include A/C units, vinyl siding and new roofing or shingles.
VA renovation loan
Also called a VA rehab loan or a reno loan, a VA renovation loan is a way to include the cost of home repairs and improvements in your VA home loan amount. No luxury upgrades are allowed. This loan is intended for repairs such as heating and cooling system replacement, upgrades to make the home more accessible for people with disabilities and the replacement of old appliances.
VA loans for manufactured homes
You can get financing for a manufactured home, also known as a mobile home or a modular home. However, there is a 25-year maximum loan term on larger units, and a 20-year loan term limit on smaller units. Lender credit requirements for VA mobile home loans may also be higher than loans for conventional homes. The mobile home must also have a permanent foundation and comply with safety standards set by the U.S. Department of Housing and Urban Development (HUD).
To explore other home loan options or check out current mortgage rates, our page of the best mortgage lenders can be an excellent place to start.
There are specific requirements you must meet to qualify for a VA home loan.
Ads by Money. We may be compensated if you click this ad.Ad
How to qualify for a VA Loan
There are specific requirements you must meet to qualify for a VA home loan.
The VA home loan program and its military benefits are available for:
Active-duty military members
Veterans
Past and present members of the National Guard
Surviving spouses of military personnel who died in combat
A VA home loan does not have a minimum credit score requirement, but most participating VA loan lenders require a minimum credit score of 620. Our advice? Always check your credit report and debt-to-income ratio before applying for a loan and improve it if you can. (Be sure to read our guide on how to dispute your credit report.)
Service requirements
VA loan eligibility depends on the length of service of the applicant. These are the requirements as set by the VA:
Veterans and active-duty service members must have served at least 90 days during wartime or 181 days during peacetime.
National Guard members must have served at least 90 days of active-duty service during wartime or six years of creditable service in the Select Reserves or Guard.
Two kinds of discharges from military service may affect eligibility determination: Other Than Honorable (OTH) and Bad Conduct.
The specific circumstances of a veteran’s discharge will be considered, which could take Veterans Affairs (VA) months to evaluate.
In all cases, once deemed eligible, you must apply for a Certificate of Eligibility (COE). The COE proves to the VA mortgage lender that you meet the VA’s eligibility requirements.
How to apply for a VA home loan
After confirming eligibility for a VA loan, take the following steps to apply:
Shop around for a lender and compare rate quotes before settling on the one that best fits your needs.
Submit your loan application. The lender will request a VA appraisal of the house. The lender reviews the appraisal, your credit history and income and decides if it accepts your loan application.
Apply for your COE and contact your state’s regional VA loan center to start the process directly with the government, in the case of Native American Direct Loans.
Once your lender accepts your application, they’ll work with you to select a title company (or entity) to close on the house.
If you have any questions that your lender can’t answer, please call your VA regional loan center at 877-827-3702. You can also watch a video on the official U.S. Dept. of Veteran Affairs’ YouTube page to learn more about VA home loans and how to apply.
How to get a VA loan with bad credit
Some lenders will issue a VA loan to veterans and service members with credit scores as low as 580 or lower. Freedom Mortgage, for example, will accept a credit score as low as 550. However, most lenders will require a minimum credit score of 620.
If you don’t meet the minimum credit score required, you should work on improving your personal finances. Paying the bills on time, paying off any debt you currently have and contacting the reporting agency to fix any errors are some steps that can help improve your score.
More About VA Mortgage Loans
Best VA Loan Lenders FAQs
What is a VA home loan?
chevron-down
chevron-up
A VA loan is a no-down-payment mortgage military benefit partially backed by the Department of Veterans Affairs (VA). Borrowers can use the loans for the purchase of a primary residence or to refinance an existing mortgage.
Who qualifies for a VA loan?
chevron-down
chevron-up
To qualify for a VA loan, you or your spouse must meet the basic service requirements set by the Department of Veterans Affairs (VA), have a valid Certificate of Eligibility, and meet the lender’s income and credit requirements.
How many times can you use a VA loan?
chevron-down
chevron-up
You can use a VA loan more than once but only to purchase or refinance a principal residence, provided you meet the availability requirements. However, you may be able to use a partial entitlement for a second loan if you haven’t used it all on your first mortgage. Remember that using a partial entitlement may mean you’ll need to shell out a down payment and a higher VA funding fee.
Are VA loans assumable?
chevron-down
chevron-up
Because VA loans are backed by the U.S. government, they can be assumed by a new lender even if they are not active military or veterans. In order to assume a VA loan, the new borrower must have a minimum credit score of 580, a DTI of 45% or lower, pay the VA funding fee and ensure the home will be their primary residence. In some cases, a down payment may also be required.
How long does it take to close a VA loan?
chevron-down
chevron-up
VA loans typically take a little longer than a traditional mortgage loan to close. Although the experience may vary from one person to another, VA loans take about 50 to 55 days to close on average. However, it is possible to close on a VA in as little as 30 days in some cases.
Does a VA loan require mortgage insurance?
chevron-down
chevron-up
No, VA loans do not require private mortgage insurance or any other type of mortgage insutance that is required by other loan types, such as conventional and FHA loans. The lack of an insurance requirement is one of the main benefits of obtaining a VA loan, along with not having to make a down payment.
Do VA loans have closing costs?
chevron-down
chevron-up
Yes, VA loans have closing costs, which can amount to 3% to 6% of the loan amount. These costs include fees associated with the loan origination and underwriting, title insurance and recording fees and the VA appraisal fee, among others. The VA funding fee, which ranges between 1.25% and 3.3% of the loan amount, is also due at closing but can be rolled into the loan. The home seller can pay up to 4% of the closing costs on a VA loan.
How We Chose the Best VA Loan Lenders
Given that many mortgage lenders offer similar products across the board, we narrowed our search criteria to three factors: rates, experience and customer service.
Rates – We chose VA loan lenders that offered the lowest rates to ensure your mortgage payments fall in line with your budget.
Experience in VA Loans – We prioritized VA mortgage lenders that process many VA loans. Having a VA mortgage lender who is familiar with this process ensures that every step of your home purchase is taken care of on time.
Customer Service – We highlighted VA mortgage lenders that excel in customer satisfaction and provide first-time homeowners step-by-step guidance throughout the pre-approval, application and loan closing.
We also made sure that our picks are registered with the Nationwide Multistate Licensing System and Registry (NMLS) and meet the minimum certification requirements for mortgage lending.
Though we always try to include accurate and up-to-date information on regulatory and legal actions, we don’t claim this information is complete or fully up to date. Interest rates and annual percentage rates are subject to change. As always, we recommend you do your own research as well.
Summary of Money’s Best VA Home Loan Lenders of April 2024
The VA home loan: Unbeatable benefits for veterans
For many who qualify, VA home loans are some of the best mortgages available.
Verify your VA loan eligibility. Start here
Backed by the U.S. Department of Veterans Affairs, VA loans are designed to help active-duty military personnel, veterans and certain other groups become homeowners at an affordable cost.
The VA loan asks for no down payment, requires no mortgage insurance, and has lenient rules about qualifying, among many other advantages.
Here’s everything you need to know about qualifying for and using a VA loan.
In this article (Skip to…)
Top 10 VA loan benefits
1. No down payment on a VA loan
Most home loan programs require you to make at least a small down payment to buy a home. The VA home loan is an exception.
Verify your VA loan eligibility. Start here
Rather than paying 5%, 10%, 20% or more of the home’s purchase price upfront in cash, with a VA loan you can finance up to 100% of the purchase price.
The VA loan is a true no-money-down home mortgage opportunity.
2. No mortgage insurance for VA loans
Typically, lenders require you to pay for mortgage insurance if you make a down payment that’s less than 20%.
This insurance — which is known as private mortgage insurance (PMI) for a conventional loan and a mortgage insurance premium (MIP) for an FHA loan — would protect the lender if you defaulted on your loan.
VA loans require neither a down payment nor mortgage insurance. That makes a VA-backed mortgage very affordable upfront and over time.
3. VA loans have a government guarantee
There’s a reason why the VA loan comes with such favorable terms.
The federal government guarantees these loans — meaning a portion of the loan amount will be repaid to the lender even if you’re unable to make monthly payments for whatever reason.
This guarantee encourages and enables private lenders to offer VA loans with exceptionally attractive terms.
4. You can shop for the best VA loan rates
VA loans are neither originated nor funded by the VA. They are not direct loans from the government. Furthermore, mortgage rates for VA loans are not set by the VA itself.
Instead, VA loans are offered by U.S. banks, savings-and-loans institutions, credit unions, and mortgage lenders — each of which sets its own VA loan rates and fees.
This means you can shop around and compare loan offers and still choose the VA loan that works best for your budget.
5. VA loans don’t allow a prepayment penalty
A VA loan won’t restrict your right to sell the property partway through your loan term.
There’s no prepayment penalty or early-exit fee no matter within what time frame you decide to sell your home.
Furthermore, there are no restrictions regarding a refinance of your VA loan.
You can refinance your existing VA loan into another VA loan via the agency’s Interest Rate Reduction Refinance Loan (IRRRL) program, or switch into a non-VA loan at any time.
6. VA mortgages come in many varieties
A VA loan can have a fixed rate or an adjustable rate. In addition, you can use a VA loan to buy a house, condo, new-built home, manufactured home, duplex, or other types of properties.
Or, it can be used for refinancing your existing mortgage, making repairs or improvements to your home, or making your home more energy-efficient.
The choice is yours. A VA-approved lender can help you decide.
Verify your VA loan eligibility. Start here
7. It’s easier to qualify for VA loans
Like all mortgage types, VA loans require specific documentation, an acceptable credit history, and sufficient income to make your monthly payments.
But, compared to other loan programs, VA loan guidelines tend to be more flexible. This is made possible because of the VA loan guarantee.
The Department of Veterans Affairs genuinely wants to make the loan process easier for military members, veterans, and qualifying military spouses to buy or refinance a home.
8. VA loan closing costs are lower
The VA limits the closing costs lenders can charge to VA loan applicants. This is another way that a VA loan can be more affordable than other types of loans.
Money saved on closing costs can be used for furniture, moving costs, home improvements, or anything else.
9. The VA offers funding fee flexibility
VA loans require a “funding fee,” an upfront cost based on your loan amount, your type of eligible service, your down payment size, and other factors.
Funding fees don’t need to be paid in cash, though. The VA allows the fee to be financed with the loan, so nothing is due at closing.
And, not all VA borrowers will pay it. VA funding fees are normally waived for veterans who receive VA disability compensation and for unmarried surviving spouses of veterans who died in service or as a result of a service-connected disability.
10. VA loans are assumable
Most VA loans are “assumable,” which means you can transfer your VA loan to a future home buyer if that person is also VA-eligible.
Assumable loans can be a huge benefit when you sell your home — especially in a rising mortgage rate environment.
If your home loan has today’s low rate and market rates rise in the future, the assumption features of your VA become even more valuable.
VA loan rates
The VA loan is viewed as one of the lowest-risk mortgage types available on the market.
Verify your VA loan eligibility. Start here
This safety allows banks to lend to veteran borrowers at lower interest rates.
Today’s VA loan rates*
Loan Type
Current Mortgage Rate
VA 30-year FRM
% (% APR)
Conventional 30-year FRM
% (% APR)
VA 15-year FRM
% (% APR)
Conventional 15-year FRM
% (% APR)
*Current rates provided daily by partners of the Mortgage Reports. See our loan assumptions here.
VA rates are more than 25 basis points (0.25%) lower than conventional rates on average, according to data collected by mortgage software company Ellie Mae.
Most loan programs require higher down payment and credit scores than the VA home loan. In the open market, a VA loan should carry a higher rate due to more lenient lending guidelines and higher perceived risk.
Yet the result of the Veterans Affairs efforts to keep veterans in their homes means lower risk for banks and lower borrowing costs for eligible veterans.
VA mortgage calculator
Eligibility
Am I eligible for a VA home loan?
Contrary to popular belief, VA loans are available not only to veterans, but also to other classes of military members.
Find and lock a low VA loan rate today. Start here
The list of eligible VA borrowers includes:
Active-duty service members
Members of the National Guard
Reservists
Surviving spouses of veterans
Cadets at the U.S. Military, Air Force or Coast Guard Academy
Midshipmen at the U.S. Naval Academy
Officers at the National Oceanic & Atmospheric Administration.
A minimum term of service is typically required.
Minimum service required for a VA mortgage
VA home loans are available to active-duty service members, veterans (unless dishonorably discharged), and in some cases, surviving family members.
To be eligible, you need to meet one of these service requirements:
You’ve served 181 days of active duty during peacetime
You’ve served 90 days of active duty during wartime
You’ve served six years in the Reserves or National Guard
Your spouse was killed in the line of duty and you have not remarried
Your eligibility for the VA home loan program never expires.
Veterans who earned their VA entitlement long ago are still using their benefit to buy homes.
The VA loan Certificate of Eligibility (COE)
What is a COE?
In order to show a mortgage company you are VA-eligible, you’ll need a Certificate of Eligibility (COE). Your lender can acquire one for you online, usually in a matter of seconds.
Verify your VA home loan eligibility. Start here
How to get your COE (Certificate of Eligibility)
Getting a Certificate of Eligibility (COE) is very easy in most cases. Simply have your lender order the COE through the VA’s automated system. Any VA-approved lender can do this.
Alternatively, you can order your certificate yourself through the VA benefits portal.
If the online system is unable to issue your COE, you’ll need to provide your DD-214 form to your lender or the VA.
Does a COE mean you are guaranteed a VA loan?
No, having a Certificate of Eligibility (COE) doesn’t guarantee a VA loan approval.
Your COE shows the lender you’re eligible for a VA loan, but no one is guaranteed VA loan approval.
You must still qualify for the loan based on VA mortgage guidelines. The guarantee part of the VA loan refers to the VA’s promise to the lender of repayment if the borrower defaults.
Qualifying for a VA mortgage
VA loan eligibility vs. qualification
Being eligible for VA home loan benefits based on your military status or affiliation doesn’t necessarily mean you’ll qualify for a VA loan.
You still have to qualify for a VA mortgage based on your credit, debt, and income.
Verify your VA loan eligibility. Start here
Minimum credit score for a VA loan
The VA has established no minimum credit score for a VA mortgage.
However, many VA mortgage lenders require minimum FICO scores of 620 or higher — so apply with many lenders if your credit score might be an issue.
Even VA lenders that allow lower credit scores don’t accept subprime credit.
VA underwriting guidelines state that applicants must have paid their obligations on time for at least the most recent 12 months to be considered satisfactory credit risks.
In addition, the VA usually requires a two-year waiting period following a Chapter 7 bankruptcy or foreclosure before it will insure a loan.
Borrowers in Chapter 13 must have made at least 12 on-time payments and secure the approval of the bankruptcy court.
Verify your VA loan home buying eligibility. Start here
VA loan debt-to-income ratios
The relationship of your debts and your income is called your debt-to-income ratio, or DTI.
VA underwriters divide your monthly debts (car payments, credit cards, and other accounts, plus your proposed housing expense) by your gross (before-tax) income to come up with your debt-to-income ratio.
For instance:
If your gross income is $4,000 per month
And your total monthly debt is $1,500 (including the new mortgage, property taxes and homeowners insurance, plus other debt payments)
Then your DTI is 37.5% (1500/4000=0.375)
A DTI over 41% means the lender has to apply additional formulas to see if you qualify under residual income guidelines.
VA residual income rules
VA underwriters perform additional calculations that can affect your mortgage approval.
Factoring in your estimated monthly utilities, your estimated taxes on income, and the area of the country in which you live, the VA arrives at a figure which represents your “true” costs of living.
It then subtracts that figure from your income to find your residual income (e.g. your money “left over” each month).
Think of the residual income calculation as a real-world simulation of your living expenses.
It is the VA’s best effort to ensure that military families have a stress-free homeownership experience.
Here is an example of how residual income works, assuming a family of four which is purchasing a 2,000 square-foot home on a $5,000 monthly income.
Future house payment, plus other debt payments: $2,500
Monthly estimated income taxes: $1,000
Monthly estimated utilities at $0.14 per square foot: $280
This leaves a residual income calculation of $1,220.
Now, compare that residual income to for a family of four:
Northeast Region: $1,025
Midwest Region: $1,003
South Region: $1,003
West Region: $1,117
The borrower in our example exceeds VA’s residual income standards in all parts of the country.
Therefore, despite the borrower’s debt-to-income ratio of 50%, the borrower could get approved for a VA loan.
Verify your VA loan eligibility. Start here
Qualifying for a VA loan with part-time income
You can qualify for this type of financing even if you have a part-time job or multiple jobs.
You must show a 2-year history of making consistent part-time income, and stability in the number of hours worked. The lender will make sure any income received appears stable. See our complete guide to getting a mortgage when you’re self-employed or work part-time.
VA funding fees and loan limits
About the VA funding fee
The VA charges an upfront fee to defray the costs of the program and make it sustainable for the future.
Veterans pay a lump sum that varies depending on the loan purpose and down payment amount.
The fee is normally wrapped into the loan. It does not add to the cash needed to close the loan.
Find out if you qualify for a VA loan. Start here
VA home purchase funding fees
Type of Military Service
Down Payment
Fee for First-Time Use
Fee for Subsequent Use
Active Duty, Reserves, and National Guard
None
2.3%
3.6%
5% or more
1.65%
1.65%
10% or more
1.4%
1.4%
VA cash-out refinance funding fees
Type of Military Service
Fee for First-Time Use
Fee for Subsequent Uses
Active Duty, Reserves, and National Guard
2.3%
3.6%
VA streamline refinances (IRRRL) & assumptions
Type of Military Service
Fee for First-Time Use
Fee for Subsequent Uses
Active Duty, Reserves, and National Guard
0.5%
0.5%
Manufactured home loans not permanently affixed
Type of Military Service
Fee for First-Time Use
Fee for Subsequent Uses
Active Duty, Reserves, and National Guard
1.0%
1.0%
VA loan limits in 2024
VA loan limits have been repealed, thanks to the Blue Water Navy Vietnam Veterans Act of 2019.
There is no maximum amount for which a home buyer can receive a VA loan, at least as far as the VA is concerned.
However, private lenders may set their own limits. So check with your lender if you are looking for a VA loan above local conforming loan limits.
Verify your VA loan eligibility. Start here
Eligible property types
Houses you can buy with a VA loan
VA mortgages are flexible about what types of property you can and can’t purchase. A VA loan can be used to buy a:
Detached house
Condo
New-built home
Manufactured home
Duplex, triplex or four-unit property
Find out if you qualify for a VA loan. Start here
You can also use a VA mortgage to refinance an existing loan for any of those types of properties.
VA loans and second homes
Federal regulations limit loans guaranteed by the Department of Veterans Affairs to “primary residences” only.
However, “primary residence” is defined as the home in which you live “most of the year.”
Therefore, if you own an out-of-state residence in which you live for more than six months of the year, this other home, whether it’s your vacation home or retirement property, becomes your official “primary residence.”
For this reason, VA loans are popular among aging military borrowers.
Buying a multi-unit home with a VA loan
VA loans allow you to buy a duplex, triplex, or four-plex with 100% financing. You must live in one of the units.
Buying a home with more than one unit can be challenging.
Mortgage lenders consider these properties riskier to finance than traditional, single-family residences, so you’ll need to be a stronger borrower.
VA underwriters must make sure you will have enough emergency savings, or cash reserves, after closing on your house. That’s to ensure you’ll have money to pay your mortgage even if a tenant fails to pay rent or moves out.
The minimum cash reserves needed after closing is six months of mortgage payments (covering principal, interest, taxes, and insurance – PITI).
Your lender will also want to know about previous landlord experience you’ve had, or any experience with property maintenance or renting.
If you don’t have any, you may be able to sidestep that issue by hiring a property management company. But that’s up to the individual lender.
Your lender will look at the income (or potential income) of the rental units, using either existing rental agreements or an appraiser’s opinion of what the units should fetch.
They’ll usually take 75% of that amount to offset your mortgage payment when calculating your monthly expenses.
VA loans and rental properties
You cannot use a VA loan to buy a rental property. You can, however, use a VA loan to refinance an existing rental home you once occupied as a primary home.
For home purchases, in order to obtain a VA loan, you must certify that you intend to occupy the home as your principal residence.
If the property is a duplex, triplex, or four-unit apartment building, you must occupy one of the units yourself. Then you can rent out the other units.
The exception to this rule is the VA’s Interest Rate Reduction Refinance Loan (IRRRL).
This loan, also known as the VA Streamline Refinance, can be used for refinancing an existing VA loan on a home where you currently live or where you used to live, but no longer do.
Check your VA IRRRL eligibility. Start here
Buying a condo with a VA loan
The VA maintains a list of approved condo projects within which you may purchase a unit with a VA loan.
At VA’s website, you can search for the thousands of approved condominium complexes across the U.S.
If you are VA-eligible and in the market for a condo, make sure the unit you’re interested in is approved.
As a buyer, you are probably not able to get the complex VA-approved. That’s up to the management company or homeowner’s association.
If a condo you like is not approved, you must use other financing like an FHA or conventional loan or find another property.
Note that the condo must meet FHA or conventional guidelines if you want to use those types of financing.
Veteran mortgage relief with the VA loan
The U.S. Department of Veterans Affairs, or VA, provides home retention assistance. The VA intervenes when a veteran is having trouble making home loan payments.
The VA works with loan servicers to offer loan options to the veteran, other than foreclosure.
Find out if you qualify for a VA loan. Start here
In fiscal year 2019, the VA made over 400,000 contact actions to reach borrowers and loan servicers. The intent was to work out a mutually agreeable repayment option for both parties.
More than 100,000 veteran homeowners avoided foreclosure in 2019 alone thanks to this effort.
The initiative has saved the taxpayer an estimated $2.6 billion. More importantly, vast numbers of veterans and military families got another chance at homeownership.
When NOT to use a VA loan
If you have good credit and 20% down
A primary advantage to VA home loans is the lack of mortgage insurance.
However, the VA guarantee does not come free of charge. Borrowers pay an upfront funding fee, which they usually choose to add to their loan amount.
The fee ranges from 1.4% to 3.6%, depending on the down payment percentage and whether the home buyer has previously used his or her VA mortgage eligibility. The most common fee is 2.3%.
Find out if you qualify for a VA loan. Start here
On a $200,000 purchase, a 2.3% fee equals $4,600.
However, buyers who choose a conventional mortgage and put 20% down get to avoid mortgage insurance and the upfront fee. For these military home buyers, the VA funding fee might be an unnecessary expense.
The exception: Mortgage applicants whose credit rating or income meets VA guidelines but not those of conventional mortgages may still opt for VA.
If you’re on the “CAIVRS” list
To qualify for a VA loan, you must prove you have made good on previous government-backed debts and that you have paid taxes.
The Credit Alert Verification Reporting System, or “CAIVRS,” is a database of consumers who have defaulted on government obligations. These individuals are not eligible for the VA home loan program.
If you have a non-veteran co-borrower
Veterans often apply to buy a home with a non-veteran who is not their spouse.
This is okay. However, it might not be their best choice.
As the veteran, your income must cover your half of the loan payment. The non-veteran’s income cannot be used to compensate for the veteran’s insufficient income.
Plus, when a non-veteran owns half the loan, the VA guarantees only half that amount. The lender will require a 12.5% down payment for the non-guaranteed portion.
The Conventional 97 mortgage, on the other hand, allows down payments as low as 3%.
Another low-down-payment mortgage option is the FHA home loan, for which 3.5% down is acceptable.
The USDA home loan also requires zero down payment and offers similar rates to VA loans. However, the property must be within USDA-eligible areas.
If you plan to borrow with a non-veteran, one of these loan types might be your better choice.
Explore your mortgage options. Start here
If you apply with a credit-challenged spouse
In states with community property laws, VA lenders must consider the credit rating and financial obligations of your spouse. This rule applies even if he or she will not be on the home’s title or even on the mortgage.
Such states are as follows.
Arizona
California
Idaho
Louisiana
Nevada
New Mexico
Texas
Washington
Wisconsin
A spouse with less-than-perfect credit or who owes alimony, child support, or other maintenance can make your VA approval more challenging.
Apply for a conventional loan if you qualify for the mortgage by yourself. The spouse’s financial history and status need not be considered if he or she is not on the loan application.
Verify your VA loan home buying eligibility. Start here
If you want to buy a vacation home or investment property
The purpose of VA financing is to help veterans and active-duty service members buy and live in their own home. This loan is not meant to build real estate portfolios.
These loans are for primary residences only, so if you want a ski cabin or rental, you’ll have to get a conventional loan.
If you want to purchase a high-end home
Starting January 2020, there are no limits to the size of mortgage a lender can approve.
However, lenders may establish their own limits for VA loans, so check with your lender before applying for a large VA loan.
Spouses and the VA mortgage program
What spouses are eligible for a VA loan?
What if the service member passes away before he or she uses the benefit? Eligibility passes to an unremarried spouse, in many cases.
Find and lock a low VA loan rate today. Start here
For the surviving spouse to be eligible, the deceased service member must have:
Died in the line of duty
Passed away as a result of a service-connected disability
Been missing in action, or a prisoner of war, for at least 90 days
Been a totally disabled veteran for at least 10 years prior to death, and died from any cause
Also eligible are remarried spouses who married after the age of 57, on or after December 16, 2003.
In these cases, the surviving spouse can use VA loan eligibility to buy a home with zero down payment, just as the veteran would have.
VA loan benefits for surviving spouses
Surviving spouses have an additional VA loan benefit, however. They are exempt from the VA funding fee. As a result, their loan balance and monthly payment will be lower.
Surviving spouses are also eligible for a VA streamline refinance when they meet the following guidelines.
The surviving spouse was married to the veteran at the time of death
The surviving spouse was on the original VA loan
VA streamline refinancing is typically not available when the deceased veteran was the only applicant on the original VA loan, even if he or she got married after buying the home.
In this case, the surviving spouse would need to qualify for a non-VA refinance, or a VA cash-out loan.
A cash-out mortgage through VA requires the military spouse to meet home purchase eligibility requirements.
If this is the case, the surviving spouse can tap into the home’s equity to raise cash for any purpose, or even pay off an FHA or conventional loan to eliminate mortgage insurance.
Qualifying if you receive (or pay) child support or alimony
Buying a home after a divorce is no easy task.
If, prior to your divorce, you lived in a two-income household, you now have less spending power and a reduced monthly income for purposes of your VA home loan application.
With less income, it can be harder to meet both the VA Home Loan Guaranty’s debt-to-income (DTI) guidelines and the VA residual income requirement for your area.
Receiving alimony or child support can counteract a loss of income.
Mortgage lenders will not require you to provide information about your divorce agreement’s alimony or child support terms, but if you’re willing to disclose, it can count toward qualifying for a home loan.
Different VA-approved lenders will treat alimony and child support income differently.
Typically, you will be asked to provide a copy of your divorce settlement or other court paperwork to support the alimony and child support payments.
Lenders will then want to see that the payments are stable, reliable, and likely to continue for another 36 months, at least.
You may also be asked to show proof that alimony and child support payments have been made in the past reliably, so that the lender may use the income as part of your VA loan application.
If you are the payor of alimony and child support payments, your debt-to-income ratio can be harmed.
Not only might you be losing the second income of your dual-income households, but you’re making additional payments that count against your outflows.
VA mortgage lenders make careful calculations with respect to such payments.
You can still get approved for a VA loan while making such payments — it’s just more difficult to show sufficient monthly income.
VA loan assumption
What is VA loan assumption?
One benefit for home buyers is that VA loans are assumable. When you assume a mortgage loan, you take over the current homeowner’s monthly payment.
Verify your VA loan home buying eligibility. Start here
That could be a big advantage if mortgage rates have risen since the original owner purchased the home. The buyer would be able to acquire a low-rate, affordable loan — and it could make it easier for the seller to find a willing buyer in a tough market.
VA loan assumption savings
Buying a home via an assumable mortgage loan is even more appealing when interest rates are on the rise.
For example:
Say a seller-financed $200,000 for their home in 2013 at an interest rate of 3.25% on a 30-year fixed loan
Using this scenario, their principal and interest payment would be $898 per month
Let’s assume current 30-year fixed rates averaged 4.10%
If you financed $200,000 at 4.10% for a 30-year loan term, your monthly principal and interest payment would be $966 per month
Additionally, because the seller has already paid four years into the loan term, they’ve already paid nearly $25,000 in interest on the loan.
By assuming the loan, you would save $34,560 over the 30-year loan due to the difference in interest rates. You would also save roughly $25,000 thanks to the interest already paid by the sellers.
That comes out to a total savings of almost $60,000!
How to assume (take on) a VA loan
There are currently two ways to assume a VA loan.
The new buyer is a qualified veteran who “substitutes” his or her VA eligibility for the eligibility of the seller
The new home buyer qualifies through VA standards for the mortgage payment. This is the safest method for the seller as it allows the loan to be assumed knowing that the new buyer is responsible for the loan, and the seller is no longer responsible for the loan
The lender and/or the VA needs to approve a loan assumption.
Loans serviced by a lender with automatic authority may process assumptions without sending them to a VA Regional Loan Center.
For lenders without automatic authority, the loan must be sent to the appropriate VA Regional Loan Center for approval. This loan process will typically take several weeks.
When VA loans are assumed, it’s the servicer’s responsibility to make sure the homeowner who assumes the property meets both VA and lender requirements.
VA loan assumption requirements
For a VA mortgage assumption to take place, the following conditions must be met:
The existing loan must be current. If not, any past due amounts must be paid at or before closing
The buyer must qualify based on VA credit and income standards
The buyer must assume all mortgage obligations, including repayment to the VA if the loan goes into default
The original owner or new owner must pay a funding fee of 0.5% of the existing principal loan balance
A processing fee must be paid in advance, including a reasonable estimate for the cost of the credit report
Find out if you qualify for a VA loan. Start here
Finding assumable VA loans
There are several ways for home buyers to find an assumable VA loan.
Believe it or not, print media is still alive and well. Some home sellers advertise their assumable home for sale in the newspaper, or in a local real estate publication.
There are a number of online resources for finding assumable mortgage loans.
Websites like TakeList.com and Zumption.com give homeowners a way to showcase their properties to home buyers looking to assume a loan.
With the help of the Multiple Listing Service (MLS), real estate agents remain a great resource for home buyers.
This applies to home buyers specifically searching for assumable VA loans as well.
How do I apply for a VA loan?
You can easily and quickly have a lender pull your certificate of eligibility (COE) to make sure you’re able to get a VA loan.
Most mortgage lenders offer VA home loans. So you’re free to shop and compare rates with just about any company that catches your eye.
Getting a VA loan for your new home is similar in many ways to securing any other purchase loan. Once you find an ideal home in your price range, you make a purchase offer, and then undergo VA appraisal and underwriting.
VA appraisal ensures that the home meets its minimum property requirements (MPRs) and is structurally sound and safe for occupancy.
What’s more, VA-specific mortgage lenders are actually some of the highest-rated (and lowest-priced) on the market. Here are a few we’d recommend checking out.
Time to make a move? Let us find the right mortgage for you
The GI Bill offers numerous benefits for veterans, active-duty service members, and their families however it does not offer its own home loan program.
But military borrowers have access to the VA home loan program through the U.S. Department of Veterans Affairs, a mortgage program designed to help make homeownership more accessible.
The VA home loan program offers significant benefits, particularly when compared to other home loan programs, including:
No down payment requirement
No private mortgage insurance (PMI)
Competitive interest rates
Flexible qualifying requirements
Verify your new rate
Is there a GI home loan program?
While there is technically no home loan program including the GI Bill benefits, military home buyers who qualify for the GI Bill also likely qualify for the VA home loan program, which offers mortgages to eligible veterans, service members and their families.
Benefits of a VA home loan
A VA loan’s most significant benefit is that it requires zero down payment. Where other programs might require anywhere from 3 to 20 percent of the loan amount upfront, a VA loan will have no down payment at all, which can represent immediate savings.
Other VA loan benefits include:
Competitively low interest rates
No private mortgage insurance
Flexible qualifying requirements
Capped closing costs
Loans are assumable
No loan limits
Can be used multiple times
Verify your new rate
VA loan eligibility & requirements 2024
VA service eligibility requirements
VA loans are intended for active-duty service members, veterans, and their families (including surviving spouses).
That means, there are service requirements that borrowers must meet to qualify.
Generally, eligible borrowers will have one or more of the following:
90 consecutive days of active service during wartime
181 days of active service during peacetime
6 years of service in the National Guard or Reserves
A spouse who died in the line of duty or due to a service-connected disability or injury
Servicemen will demonstrate their qualifying military background with a Certificate of Eligibility (COE), a document that indicates the specifics of their military service and the total amount of their entitlement.
Borrowers can request a COE directly from the VA, or a VA lender can help you request it.
VA financial eligibility
The VA doesn’t set qualifying financial thresholds for its borrowers. These requirements will be set by the individual private lender issuing the VA loan. That means the minimums required to qualify will vary somewhat from lender to lender, and military borrowers may even be in a position to shop around if they are having difficulty qualifying.
That said, VA borrowers can generally expect to need a score of 640 or greater and a debt-to-income (DTI) ratio of 41 percent or less.
VA loan property requirements
In addition to qualifying requirements for the borrower, the VA sets requirements for the property that is being purchased with a VA loan. This is intended to ensure that the VA program is being used to get military borrowers into homes that are suitable primary residences — both safe and structurally sound.
The VA lender will order a VA appraisal — not to be confused with a home inspection — which will ensure the home meets the VA’s livability standards. Learn more about the VA Minimum Property Requirements (MPRs) here.
Verify your new rate
Types of VA home loans
VA loans can be used to purchase or refinance a house. The types of loans available through the VA program include:
VA Purchase Loans: These can be used to purchase a primary residence, including a multi-unit property of up to four units, a VA-approved condo or townhouse, or a manufactured home.
VA Streamline Refinance: Also sometimes known as a VA Interest Rate Reduction Refinance Loan (IRRRL), these refinance loans are intended to help existing VA homeowners quickly and affordably lower their interest rate or improve their loan terms.
Native American Direct Loans: These VA loans are specifically for veterans of Native American descent and can be used to buy, build, renovate, or refinance properties on federal trust lands.
VA Cash-out Refinance Loans: These VA loans allow homeowners to convert their home equity into cash by replacing an existing home loan with a larger one and giving the borrower a lump sum of cash. VA cash-out refinance can be one option for converting a non-VA home loan to a VA loan.
Verify your new rate
What is the VA funding fee?
The VA funding fee is a percentage of the loan amount paid at closing. This money enables the VA home loan program to be self-sustaining and for the Department of Veterans Affairs to guarantee future VA loans.
The amount of the funding fee is variable and typically costs between 0.5 and 3.3 percent of the loan amount. The exact amount is determined by the nature of the borrower’s military service, the size of the down payment, the type of loan, and the number of times the borrower has used the VA loan program.
While the VA funding fee can be a significant upfront cost, it is a cost that is generally offset by the other savings that the VA loan program offers.
Finally, the VA funding fee can be financed into the overall loan amount and paid over time.
Verify your new rate
GI loan FAQ
How much is a typical GI home loan?
While there is no GI home loan, the VA home loan program has no limits. That means borrowers with full entitlement can get a loan amount for as much as they like — provided they can qualify for it financially with a mortgage lender.
What are the benefits of a VA home loan?
The VA home loan is a product intended to help veterans, active-duty service members, reservists, and even some of their family members, to purchase a home.How much house can I afford as a veteran? The amount of house that a borrower can afford with a VA home loan will depend on their budget, the interest rate they qualify for, and the size of down payment they can afford to make.
What is a Certificate of Eligibility (COE)?
The Certificate of Eligibility (COE) is a document that indicates the details of someone’s service with the armed forces and the amount of VA entitlement that is available to them. Lenders use the COE to confirm a borrower meets the VA service requirements.
Can I get a COE as the spouse of a veteran?
In some cases, a spouse may be able to get a COE, such as when the service member is missing in action, a prisoner of war, or has died in the line of service or from a service-related injury/disability.
Can I get a COE for a VA direct or VA-backed home?
COEs are required for all VA loans, including Native American Direct loans, or VA-based purchase or refinance loans.
How much is the funding fee?
The VA funding fee is typically between 0.5 and 3.3 percent of the total loan amount, depending on whether the borrower is purchasing or refinancing, whether or not they are a first-time borrower, how many times they have used the VA loan program, the size of their down payment, and the nature of their military service.
Are World War II vets eligible for the VA home loan program?
Yes, WWII veterans are eligible for the VA home loan program. Service members with 90 days of consecutive active service during wartime, including in Korea, Vietnam, and Iraq, are eligible for the VA loan program.
Verify your new rate
Military home loans: The bottom line
While the GI Bill doesn’t offer a home loan benefit, the VA home loan program is a wonderful resource for service members looking to purchase or refinance a home.
Time to make a move? Let us find the right mortgage for you
Bad credit can feel like the end of your ability to borrow, especially if you are trying to secure a home loan. However, there are options available for borrowers with bad credit to fund the purchase of their dream home.
One of those options is the VA home loan. Luckily, securing a VA loan with bad credit is not impossible. Let’s dive into the details of securing your VA home loan with bad credit.
What is a VA loan?
First, let’s talk about the details of a VA home loan. These types of home loans are an offered benefit to both veterans and current service members.
Va loans make qualifying for financing easier for veterans. Additionally, the VA loan offers other benefits such as a no down payment option which can be beneficial. If you’ve had trouble saving up a hefty down payment, then that benefit will come as a relief.
Although the Department of Veterans Affairs makes VA loans possible, the agency itself does not issue the loan. Private lenders issue the loan to the borrower, but the loan is guaranteed by the Department of Veterans Affairs. Based on this guarantee, VA loans do not carry private mortgage insurance that is typically required without a down payment of 20%.
All of these benefits can add up to a great deal for veterans looking to purchase a home. Even if you have bad credit, it is possible to take advantage of the benefits that a VA loan has to offer.
Who is eligible for a VA loan?
Before you apply for a VA home loan, you’ll need to obtain a Certificate of Eligibility. With this, you’ll be able to prove to your lender that you are in fact able to obtain a VA home loan.
Luckily, the process is not very complicated and almost every member or veteran of the military is eligible. Additionally, members and veterans of the reserve and National Guard are usually eligible. Finally, spouses of military members that died on active duty or from a service-related injury may be eligible for the VA loan.
If you are an active-duty military member, then you will need to serve approximately 6 months before you are eligible.
Keep in mind, you will need to use this home as your primary residence and move into the new home within 60 days of purchase. Sometimes exceptions are made to this general rule, but it will require a case-by-case evaluation. If you do not intend to use this home as your primary residence, then the VA home loan is not a viable option.
What are the credit requirements for a VA loan?
The Department of Veterans Affairs does not require a minimum credit score for VA loan borrowers. As far as the VA is concerned, the most important requirement is the certificate of eligibility. Other than that, the VA requires that borrowers have made on-time payments for the past 12 months. The VA also prefers that borrowers have not declared bankruptcy in at least two years.
However, private lenders are the entity underwriting the loan, not the VA. VA home loan lenders are usually willing to work with credit scores much lower than the mid-700s that conventional loans require.
Still, most lenders prefer applicants with a credit score of at least 620 for VA home loans. A 620 credit score is much lower than most lenders will accept without the VA guarantee to back the loan.
Don’t be discouraged if you have a lower credit score. Applications are evaluated on a case-by-case basis and there are other compensating factors considered. In some cases, a lender may be willing to work with you even if your credit score is below 620. Here are the other factors that VA lenders look at:
Debt to income ratio. If you have a high debt burden, then lenders are less willing to work with you. Generally, VA borrowers should have a debt to income ratio of less than 41%. If you have a low debt burden then your application will be stronger.
Free cash flow. The VA suggests to lenders that the monthly free cash flow of applicants is evaluated. Your free cash flow is based on your income minus all monthly obligations which might include childcare, taxes, insurance, and more.
Job history. The stability of your current job may come into play. If you’ve had a stable high paying job for over 2 years, that can help to strengthen your application.
Evidence of credit improvement. Even if you have poor credit, the lender may consider you an acceptable credit risk if you have been making payments on time for the past 12 months. Plus, if you are working on a Consumer Credit Counseling plan that can improve your application.
Past bankruptcies. If you have declared bankruptcy recently, that will negatively affect your application. Generally, the bankruptcy will prevent you from obtaining a VA loan for at least 1 to 2 years.
Most VA home loans carry a funding fee between 2 and 3.5% of the total loan. Typically, this fee is bundled into the loan, but some lenders may require it upfront. It can be an added expense on an already expensive home purchase process. Make sure to factor this in before you accept the terms of your loan.
VA Loan Choices
If you already have a home loan but are intrigued by the benefits of the VA home loan, don’t worry! You may have the opportunity to refinance an existing home loan into a new VA home loan.
If you are seeking a lower interest rate, then the Interest Rate Reduction Loan (IRRRL) might be a suitable option. Sometimes lenders refer to this loan option as a VA Streamline Refinance loan. The refinancing process through the VA is extremely straightforward. Plus, it is possible to complete the entire process without any out-of-pocket fees.
If you are seeking to take cash out of your home’s equity, then a cash-out refinance loan through the VA may be a practical option. You can use the cash to pay for home improvements and other obligations.
Both types of VA refinance options could help you reach your financial goals. Like the standard VA home loan, lenders may be willing to work with you even if you have less-than-perfect credit.
Other Options for Home Loans with Bad Credit
The VA home loan is not your only option if you have bad credit. Luckily, there are other programs on the market that you may be able to work with if you have bad credit. It is a good idea to check out all of your options. As you are looking, keep interest rates and down payment requirements in mind. You never know which will be the best option until you take a closer look.
FHA
With a minimum credit score requirement of 500, FHA loans are a suitable option for those with bad credit. If you have a credit score above 580, then you may even be able to qualify for a reduced down payment.
FHA loans are backed by the Federal Housing Administration. First-time homebuyers with bad credit are encouraged to use this program to secure their first home purchase. VA loans have more benefits associated with them, but FHA loans are still worthwhile.
USDA
USDA loans can also be a viable option if you have bad credit. The catch is that you must be willing to live in a rural area.
Typically, you’ll need to have a 640 credit score to have your application approved. However, it is not a hard cut-off. If you are planning to live in a rural area, then you might qualify for these U.S. Department of Agriculture-backed home loans.
Start Your Search
When you are ready to start looking through your mortgage options, it is important to get quotes from multiple lenders. Remember, even the smallest reduction in your interest rate can save you thousands of dollars over the course of your loan.
Here are a few places to get started:
LendingTree
LendingTree is not a lender, but the company can connect you to countless mortgage lenders across the country. They’ll match you to your options based on your credit score, debt-to-income ratio, and more.
It is a great resource to find several lender options within just a few minutes. If you want to compare many of your options easily, then LendingTree is a great place to start.
Find out more in our full review of LendingTree.
New American Funding
New American Funding may be the best option for veterans with poor credit. The company works with customers to individually review each loan application and the entire underwriting process.
It may take longer to close if you are working with a human underwriter. However, if you have a poor credit history, the reviewer may be able to stay flexible and push for an approved application.
Find out more about New American Funding in our full review.
Can’t find a lender?
If you cannot find a lender that is willing to work with you, then you may have to accept that your credit scores need improvement. Luckily, there are many ways that you can work to improve your credit score.
Start by checking over your credit report for mistakes. If you find an error, then make sure to have it removed from your credit report by disputing it with the credit bureaus. Next, make an effort to pay all of your bills on time. Timely payments can significantly boost your credit score.
Finally, start paying down your debts. Not only will this help improve your credit history, but also can bring some relief to your heavy load.
As your credit score starts to improve, your approval odds will continue to increase. When the time is right, apply again!
Bottom Line
Owning your home can be a milestone of American success. When you have a place to put down roots and grow into your community, it can be a wonderful feeling.
It is especially important for veterans to achieve this milestone. After their sacrifices made in service to our country, it’s remarkable to see them come home and build their lives. Take action today and start looking for a lender to fund your VA home loan.
Mortgage refinancing gives homeowners flexibility as their financial circumstances and needs change.
When you refinance your mortgage, you may be able to lock in a lower interest rate and get rid of private mortgage insurance, which can lead to significant savings over the life of the loan. It also allows you to switch from an adjustable-rate mortgage to a fixed-rate mortgage (and vice versa) or go from a government-backed loan to a conventional loan.
You can even shorten your loan terms by refinancing your mortgage, so you can pay off your loan even faster. Or, you can use refinancing to tap into the equity in your home to pay off debt, pay for a huge renovation or purchase another property.
CNBC Select evaluated home loan lenders based on the types of loans offered, customer support and minimum down payment amount, among others (see our methodology below).
The best mortgage refinance lenders
Best for cashing out full equity
Rocket Mortgage Refinance
Annual Percentage Rate (APR)
Apply online for personalized rates
Types of loans
Conventional loans, FHA loans, VA Interest Rate Reduction Refinance Loan (IRRRL) and jumbo loans
Fixed-rate Terms
8 – 29 years
Adjustable-rate Terms
Not disclosed
Credit needed
580 if opting for FHA loan refinance or VA IRRRL; 620 for a conventional loan refinance
Pros
Can use the loan to refinance a single-family home, second home or investment property, or condo
Can get pre-qualified in minutes
Rocket Mortgage app for easy access to your account
Allows borrowers to cash out 100% of their home’s equity
Cons
Doesn’t offer USDA loans, HELOCs, construction loans, or mortgages for mobile homes
Rocket Mortgage is a great option to consider if you’re looking to maximize the equity you can cash out of your home.
One of the advantages of refinancing is being able to tap into your home’s equity to pay for large expenses, like home improvements or a second property, or to consolidate debt. This is called a cash-out refinance. The total amount you’re able to borrow will depend on your home’s value and equity.
Most lenders only allow homeowners to cash out 80–90% of their home’s equity. But according to its website, Rocket Mortgage allows borrowers who are refinancing to cash out 100% of their equity, as long as they have a minimum FICO score of 620. This means you’ll have access to more cash when you refinance. Rocket Mortgage also offers a fast, online pre-approval process.
Best for no lender fees
Ally Home
Annual Percentage Rate (APR)
Apply online for personalized rates; fixed-rate and adjustable-rate mortgages included
Types of loans
Fixed-rate, adjustable-rate and jumbo loans available
Fixed-rate Terms
15 – 30 years
Adjustable-rate Terms
5/6 ARM, 7/6 ARM, 10/6 ARM
Credit needed
Not disclosed
Pros
Doesn’t charge lender fees (no application, origination, processing, or underwriting fees)
Provides custom quotes in just a few minutes with no impact to your credit score
Online support available
Existing Ally customers can receive a discount that gets applied to closing costs
Cash-out refinancing available
Cons
Doesn’t offer FHA loans, USDA loans, VA loans or HELOCs, however, Ally allows borrowers to refinance from an FHA, USDA, or VA loan to a conventional loan
Mortgage loans are not available in Hawaii, Nevada, New Hampshire, or New York
As with its home purchase loans, Ally Bank’s mortgage refinances don’t come with lender fees. In other words, borrowers won’t pay application, origination, processing, or underwriting fees. Keep in mind, however, that you’ll still have to pay other charges like title checks and appraisal fees. Still, cutting lender fees out of the equation still gives borrowers a chance to save some money on an already-expensive process.
Ally offers both fixed-rate and adjustable-rate loans in addition to jumbo loans for refinancing. While this lender doesn’t offer any FHA, VA, or USDA loans, borrowers who currently have these loan types and wish to refinance to a conventional loan may do so through Ally Bank.
Best for a no-frills lender
Better.com Mortgage Refinance
Annual Percentage Rate (APR)
Apply online for personalized rates
Types of loans
Conventional loan, FHA loan and jumbo loan
Fixed-rate Terms
15–30 years
Adjustable-rate Terms
Not disclosed
Credit needed
Not disclosed
Pros
No origination fee
No prepayment penalties for refinance
Receive a loan estimate in as little as 3 days
The Better Buying Guarantee provides up to $3,500 in lender paid credits to offset “covered fees,” which include: Lender’s Title Insurance Policy Fees; Owner’s Title Insurance Policy Fees; Appraisal Fees (includes second appraisal fee, appraisal re-inspection fee and appraisal recertification fee, if applicable); Flood Certification Fees; Credit Report Fees; and Other Settlement Fees (discount points are excluded)
Cons
Doesn’t offer VA loans or USDA loans
The Better Buying Guarantee is not available in Washington state
Better.com offers a straightforward refinance service with a few ways for borrowers to save money. This lender doesn’t charge any origination fees on the loan, and individuals who are refinancing their mortgage won’t be charged prepayment penalties for paying off the new loan early. Its pre-approval process can be completed in as little as three minutes and won’t impact your credit score.
This lender also offers a Better Buying Guarantee, which provides borrowers with up to $3,500 in lender-paid credits to offset “covered fees.” Those fees include: Lender’s Title Insurance Policy Fees; Owner’s Title Insurance Policy Fees; Appraisal Fees (includes second appraisal fee, appraisal re-inspection fee and appraisal recertification fee, if applicable); Flood Certification Fees; Credit Report Fees; and Other Settlement Fees (discount points are excluded). See their Terms and Conditions for rules around eligibility.
Better.com offers mortgage refinance terms that range from 15 to 30 years, and boasts the ability to provide potential borrowers with a loan estimate in as little as three days.
Best for saving money
SoFi Mortgage Refinance
Annual Percentage Rate (APR)
Apply online for personalized rates
Types of loans
Conventional loans and jumbo loans
Fixed-rate Terms
10 – 30 years
Adjustable-rate Terms
Not disclosed
Credit needed
Pros
Provides access to Mortgage Loan Officers for guidance
Access to account via the mobile app
Members save $500 on processing fees for a cash-out refinance
Cons
Doesn’t offer FHA, VA or USDA loans
Available in all states except Hawaii
SoFi is known for offering a plethora of savings opportunities to members who use their financial products and services. When it comes to mortgage refinancing, this lender gives members the opportunity to save $500 on the loan processing fee as long as they also have a SoFi Personal Loan, SoFi Student Loan or have a minimum balance of $50,000 in their SoFi Invest accounts at the time of their application submission.
Mortgage refinance terms range from 10 years to 30 years, and SoFi offers an app to help customers have easy access to managing their account details.
Best for availability
PNC Bank Mortgage Refinance
Annual Percentage Rate (APR)
Apply online for personalized rates; fixed-rate and adjustable-rate mortgages included
Types of loans
Fixed-rate, adjustable-rate, FHA loans, VA loans and jumbo loans
Fixed-rate Terms
10 – 30 years
Adjustable-rate Terms
Available in periods of 7 and 10 years for a fixed rate, followed by an adjustment period when the interest rate may increase or decrease on an annual or semi-annual basis
Credit needed
Not disclosed
Pros
Refinance available for primary and secondary homes, and investment properties
Offers a wide variety of loans to suit an array of customer needs
Offers refinancing for VA and FHA loans
Available in all 50 states
Online and in-person service available
Cons
Doesn’t offer home renovation loans
PNC Bank is one of the most accessible lenders on this list since it provides services and mortgage products in all 50 states — both in-person and online. This lender offers fixed-rate loan terms that range from 10 years to 30 years. For jumbo loans, though, the loan terms go from 15 years to 30 years. Adjustable-rate terms are also available.
To make sure you’re fully prepared to begin the application process, PNC Bank has an application checklist on their website that lists all of the documents you’ll need if you want to refinance your mortgage.
Best for a credit union
PenFed Credit Union Mortgage Refinance
Annual Percentage Rate (APR)
Apply online for personalized rates
Types of loans
Rate-and-term refinance (for conventional, FHA and VA refinances), VA Interest Rate Reduction Loan (IRRRL), cash-out refinance, home equity line of credit (HELOC)
Fixed-rate Terms
Not disclosed
Adjustable-rate Terms
Credit needed
Not disclosed
Pros
Covers cost of VA funding fees, title fees, recording fees, transfer taxes, appraisal fee, credit report and flood certification where applicable
Offers jumbo loan refinance up to $3 million
Online support available
Available in all 50 states
Cons
Doesn’t offer USDA loans
Doesn’t offer adjustable-rate terms
PenFed cuts out some major closing costs for homeowners looking to refinance their mortgage. It will cover the cost of VA funding fees, title fees, recording fees, transfer taxes, appraisal fee, credit report and flood certification wherever applicable. This could save borrowers anywhere from hundreds to thousands of dollars in closing costs.
Of course, you’ll want to make sure you have a PenFed membership in order to apply for this lender’s mortgage products. Membership is open to everyone but you’ll need to open a savings account and make an initial deposit of at least $5.
FAQs
What do you need to refinance your mortgage?
As with any other line of credit, mortgage refinancing requires a decent credit score. Lenders typically like to see a minimum credit score of 620 or higher. The higher your credit score, the more likely you are to be qualified for a lower mortgage interest rate. Borrowers should also have at least 20% equity in their home in order to refinance. You’ll also need to provide documents, such as bank statements, pay stubs, W-2s, 1099s, tax returns, employment verification and proof of homeowner’s insurance.
How do you refinance your mortgage?
To refinance your mortgage, you’ll want to make sure you have all the required financial documents and meet your desired lender’s qualifications. You’ll use this information to submit an application (either online or in-person, depending on the lender you’d like to go with). Lenders typically also offer the help of mortgage refinance experts who can walk you through the process, answer any questions you have and make sure you submit a complete application.
How often can you refinance your mortgage?
There is no limit on the number of times you can refinance a home loan. Refinancing can be valuable when your circumstances change. For instance, if you were to change careers and take a pay cut, refinancing into a mortgage with a longer loan term would allow you to receive lower monthly payments.
Just be aware that refinancing is not free and every time you refinance, you’ll have to pay a slew of closing costs and other fees, and your credit score could take a hit every time the lender runs a hard inquiry.
What are the different types of mortgage refinances?
A rate-and-term refinance is one of the most common types of mortgage refinancing since it involves simply changing the loan term (how long you have to repay the balance) or the interest rate.
Borrowers can also do a cash-out refinance where the borrower takes out a loan that’s larger than what they currently owe and can use the difference between the two loans to receive cash. Borrowers can then use that cash for a large expense, a down payment on another property, debt consolidation and more.
As the name suggests, FHA Streamline Refinance is meant for borrowers who are looking to refinance their FHA loan. A VA Streamline Refinance is similar except it’s meant for VA loan borrowers.
Does refinancing hurt your credit?
As with any other form of credit you apply for, applying for a mortgage refinance means the lender will run a hard inquiry on your credit. Hard pulls do temporarily lower your credit score by a few points. However, making on-time monthly payments and avoiding applying for too many new lines of credit all at once can help your credit score recover.
Reasons not to refinance your mortgage
Refinancing isn’t for everyone. If you already have a low, fixed interest rate with affordable monthly payments, refinancing your mortgage might not save you money. In fact, due to closing costs, refinancing can actually wind up costing you more than you anticipated.
You should also avoid refinancing if you have bad or fair credit since you could end up with a higher interest rate, which will make the loan even more expensive.
It’s also not a good idea to refinance if you’re already several years into a mortgage. Refinancing essentially replaces your loan with a new one and you’ll have to start all over with payments. So if you’re already, say, 15 years into a 30-year mortgage, refinancing to another 30-year mortgage means you’ll still be on the hook with the mortgage for another 30 years.
Bottom line
Refinancing can be instrumental for those who want to have lower monthly payments or a lower interest rate, or want to tap into some of the cash in their home. Just make sure you run the numbers so you can be sure they make sense for your situation, since there are some instances when refinancing may not be a good idea.
Our methodology
To determine which mortgage lenders are the best, CNBC Select analyzed dozens of U.S. mortgages offered by both online and brick-and-mortar banks, including large credit unions, that come with fixed-rate APRs and flexible loan amounts and terms to suit an array of financing needs.
When narrowing down and ranking the best mortgages, we focused on the following features:
Fixed-rate APR: Variable rates can go up and down over the lifetime of your loan. With a fixed rate APR, you’ll lock in an interest rate for the duration of the loan’s term, which means your monthly payment won’t vary, making your budget easier to plan.
Types of loans offered: The most common kinds of mortgage loans include conventional loans, FHA loans and VA loans. Lenders may also offer USDA loans and jumbo loans. Having more options available means the lender can to cater to a wider range of applicants. We’ve also considered loans that would suit the needs of borrowers who plan to purchase their second home or a rental property.
Closing timeline: The lenders on our list are able to offer closing timelines that vary from as promptly as two weeks after the home purchase agreement has been signed to as many as 45 days after the agreement has been signed. Specific closing timelines have been noted for each lender.
Fees: Common fees associated with mortgage applications include origination fees, application fees, underwriting fees, processing fees and administrative fees. We evaluate these fees in addition to other features when determining the overall offer from each lender. Though some lenders on this list do not charge these fees, we have noted any instances where a lender does.
Flexible minimum and maximum loan amounts/terms: Each mortgage lender provides a variety of financing options that you can customize based on your monthly budget and how long you need to pay back your loan.
No early payoff penalties: The mortgage lenders on our list do not charge borrowers for paying off the loan early.
Streamlined application process: We considered whether lenders offered a convenient, fast online application process and/or an in-person procedure at local branches.
Customer support: Every mortgage lender on our list provides customer service via telephone, email or secure online messaging. We also opted for lenders with an online resource hub or advice center to help you educate yourself about the personal loan process and your finances.
Minimum down payment: Although minimum down payment amounts depend on the type of loan a borrower applies for, we noted lenders that offer additional specialty loans that come with a lower minimum down payment amount.
After reviewing the above features, we sorted our recommendations by best for overall financing needs, quick closing timeline, lower interest rates and flexible terms.
Note that the rates and fee structures advertised for mortgage refinances are subject to fluctuate in accordance with the Fed rate. However, once you accept your mortgage agreement, a fixed-rate APR will guarantee your interest rate and monthly payment remain consistent throughout the entire term of the loan, unless you choose to refinance your mortgage at a later date for a potentially lower APR. Your APR, monthly payment and loan amount depend on your credit history, creditworthiness, debt-to-income ratio and the desired loan term. To take out a mortgage, lenders will conduct a hard credit inquiry and request a full application, which could require proof of income, identity verification, proof of address and more.
Catch up on Select’s in-depth coverage of personal finance, tech and tools, wellness and more, and follow us on Facebook, Instagram and Twitter to stay up to date.
Subscribe to the Select Newsletter!
Our best selections in your inbox. Shopping recommendations that help upgrade your life, delivered weekly. Sign-up here.
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
VA loans are available to active-duty military members, veterans, reservists, National Guard members, and certain surviving spouses. They require no down payment or mortgage insurance and typically come with lower interest rates than other types of mortgages. If you think you might qualify for a VA loan, it’s worth comparing the costs to those of a conventional loan.
What Is a VA Home Loan?
VA loans were created in 1944 as part of the G.I. Bill, and they have grown in popularity since. They are one way to buy a house with no money down.
Most VA loans are VA-backed loans. Approved private lenders issue the loans, part of which the U.S. Department of Veterans Affairs agrees to repay if the borrower stops making the payments. That guarantee incentivizes lenders to offer VA loans with attractive terms.
The VA issues direct loans to Native American veterans or non-Native American veterans married to Native Americans. The agency also refinances VA and other mortgages.
How Does a VA Home Loan Work?
To receive a VA loan, a veteran, service member, reservist, National Guard member, or surviving spouse first has to apply for a Certificate of Eligibility. Once you have your COE and have decided what you wish to spend on a home, you’ll seek out a lender. Most lenders charge a flat 1% fee for VA loans but there may be other fees as well.
Once you have a lender and find a home to purchase, you’ll need to have the home appraised by a VA-approved appraiser to ensure it meets the minimum qualifications for a VA loan. If it does, you’re on your way to moving day.
Types of VA Home Loans
VA loans are available to help eligible borrowers buy, build, renovate, or refinance. Here are the main programs.
VA-Backed Loans
VA-backed home loans are full of advantages. They require no down payment or mortgage insurance, and have fairly loose rules about qualifying.
The home must be a primary residence, but up to a four-unit multifamily property may be purchased if one unit will be owner-occupied.
Approved condos and manufactured homes classified as real property are eligible.
VA Direct Home Loans
If either a veteran or their spouse is Native American, they may qualify for a Native American Direct Loan (NADL) to purchase, construct, or improve a home on federal trust land.
The VA issues these loans directly to borrowers who meet credit standards and whose tribal government has an agreement with the VA.
VA Refinancing
The VA offers an interest rate reduction refinance loan (IRRRL) and a cash-out refinance.
An IRRRL, or VA Streamline Refinance, refinances an existing VA-backed home loan. No verification of credit, income, or employment is required, and you might not need a home appraisal.
The VA-backed cash-out refinance can be used to convert any type of home loan to a VA mortgage with cash back at closing. (Cash back is optional: You can also use a VA cash-out refi to switch to a VA loan, shed mortgage insurance, and possibly lower your mortgage rate.)
VA Renovation and Construction Loans
The VA renovation loan is Veterans Affairs’ answer to the FHA 203(k) loan. It allows eligible borrowers to purchase and repair a property using a single VA loan with no down payment.
VA construction loans can help borrowers finance land and the construction of a home without a down payment. The hitch is, few lenders offer these loans.
Some states also administer their own loan programs for qualified veterans. California, for example, may have a high cost of living but it does offer its own home loan program to veterans.
Who Should Apply for a VA Home Loan
Eligible applicants for a VA loan are:
• Current service members who have served for 90 consecutive days.
• Veterans who served after 1990 for 24 continuous months or for the full period (at least 90 days) when called or ordered to active duty. (Those who served prior to 1990 may also be eligible; check VA.gov for detailed requirements.)
• Service members who served at least 90 days of active duty in the Reserves or the National Guard after 1990. (Those who served prior to 1990 may also be eligible; visit VA.gov for details.)
• Spouses of service members who died in the line of duty or from a service-connected disability, or who are missing or are prisoners of war.
VA Home Loan Requirements for Buying a House
If you apply and meet the requirements for a VA loan, you’ll receive a certificate of eligibility. Approved lenders can check eligibility quickly, or potential borrowers can contact va.gov.
The document indicates “full entitlement.” For full entitlement, at least one of these must be true:
• You’ve never used your home loan benefit
• You’ve paid a previous VA loan in full and sold the property
• You’ve used your home loan benefit but had a foreclosure or short sale and repaid the VA in full
Credit, Income, Debt
For a VA loan, the lender will determine how much of a mortgage you can afford based on your credit history, income, debts, and assets.
The VA does not have a minimum credit score, but most mortgage lenders will want to see a FICO credit score above 620. Some may go lower.
According to VA residual-income guidelines, borrowers should have a certain amount of discretionary income left over each month after paying major expenses.
The VA does not name a maximum debt-to-income ratio, but it does suggest placing more financial scrutiny on borrowers with a DTI of more than 41%, which includes the projected mortgage payments.
VA Loan Rates
For VA-backed loans, approved private lenders set their own VA loan rates and fees. It’s smart to contact more than one lender when shopping for a mortgage and compare offers.
VA Funding Fee
There will be no mortgage insurance on a VA loan, but most borrowers will pay a one-time funding fee for a VA-backed or VA direct home loan. The fee can be rolled into the loan.
For the first use of a VA-backed purchase or construction loan, the funding fee is 2.3% of the loan amount if the borrower is putting less than 5% down.
The NADL funding fee for a home purchase is 1.25%.
A few borrowers, including those who are receiving VA compensation for a service-connected disability, do not have to pay the funding fee.
Benefits of VA Home Loans
Here are the main selling points of VA loans:
• No down payment.
• More attractive interest rates and terms than loans from some mortgage lenders.
• Possibly lower closing costs. The VA allows lenders to charge up to 1% of the loan amount to cover origination, processing, and underwriting costs. Sellers can pay all of your loan-related closing costs, but yes, that’s a big ask. VA loans have an appraisal fee that is set by area. Buyers may purchase mortgage points to reduce the interest rate.
• There’s no limit to the amount that can be borrowed with a VA home loan. However, there is a limit to the amount of the loan that the VA will guarantee.
• No minimum credit score requirement (although some lenders may still not lend to those with lower credit scores).
• A VA home loan can be for first-time homebuyers or repeat buyers.
• VA loans are assumable, meaning the loan could be taken over by the home’s next purchaser.
Downsides of VA Home Loans
Although there are many benefits to VA loans, there are a few potential pitfalls to keep in mind.
The main one is the funding fee. If rolled into the loan, this increases monthly payments as well as total interest paid over the life of a loan.
Others:
• VA loans can’t be used to purchase investment properties or vacation homes.
• Some approved condos are eligible, but co-op properties are not.
• Zero down payment is a nice option, but if the housing market falters, borrowers may be paying more on their home than it’s worth.
What Is the VA Loan Limit?
As of 2020, if you have full entitlement, you don’t have a VA loan limit.
If you have a remaining entitlement (e.g., you have a VA loan you’re still paying back), you can use your remaining entitlement — on its own or with a down payment — to take out another VA loan.
In that case, the VA loan limit is based on the county conforming loan limit where you live. (In most of the country, the 2023 conforming loan limit for one-unit properties is $726,200.)
VA Loan vs Traditional Mortgage
After comparing the pros and cons of VA loans, some borrowers may find that a conventional loan with a low down payment is a better fit for their long-term financial goals. Even if they save money upfront, in the long term, VA loan borrowers often end up paying more.
Conventional loans can be used for vacation homes or investment properties. They don’t include the VA funding fee.
And some borrowers who put less than 20% down may be able to avoid PMI.
The Takeaway
VA loan requirements are more flexible than some others, and VA loan rates may be slightly lower. VA loans have benefits, but it might pay to get loan estimates for conventional loans, too, and compare. For one thing, nothing down means starting out with no equity.
Applying for a home mortgage loan with SoFi requires as little as 3% down for qualifying first-time homebuyers. The fixed rates are competitive. SoFi finances primary homes, second homes, and investment properties.
Check out SoFi Mortgages and get your rate with no obligation.
FAQ
What are the disadvantages of a VA loan?
The main downside of a VA loan is its funding fee. VA loans also can’t be used to purchase investment or vacation properties, or co-ops (although some condos are eligible).
What is the difference between a VA loan and a regular loan?
The main difference between a VA loan and a conventional loan is that VA loans do not require a down payment or mortgage insurance. And, of course, VA loans are only available to qualified service members, veterans, and certain spouses.
Do you pay a VA loan back?
Yes. A VA loan is a loan, not a gift, and It must be repaid. A homeowner who doesn’t make payments could lose their home and any equity they had built up in it.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
A less-than-stellar credit score doesn’t automatically disqualify you from refinancing your mortgage. Fortunately, there are several options to refinance your mortgage with a bad credit score.
Here’s what you need to know about lender credit standards and the steps you can take to refinance with a lower credit score.
What Credit Score Is Needed to Refinance?
Every lender has a different set of criteria for credit scores and refinancing. To refinance a conventional mortgage, most lenders look for a credit score of at least 620.
Some government programs may require a credit score of at least 580 and some may have no minimum at all.
For example, most Federal Housing Administration (FHA) loans require a credit score of at least 580. The Department of Veterans Affairs (VA) doesn’t set a minimum credit score.
As a general rule of thumb, the higher your credit score, the more likely you are to qualify for a mortgage refinance.
However, your credit score isn’t the only determining factor. If you have a higher debt-to-income (DTI) ratio and loan-to-value (LTV) ratio and minimal cash on hand, the credit score requirement may increase.
How to Refinance a Mortgage with a Bad Credit Score
It may be possible to refinance your mortgage with a bad credit score, without needing to improve your credit profile first. You should explore all of your refinancing options to find the one that makes the most sense for your situation.
1. Chat with Your Existing Mortgage Lender
Talk with your lender about your refinance options with a bad credit score. If you’ve made timely mortgage payments, your lender may be able to work with you even with a bad credit score.
Your lender could offer you a portfolio refinance, which is originated and kept by the lender rather than being sold on the secondary market. Because of this, portfolio refinance loans oftentimes have relaxed qualification standards.
It’s still a good idea to speak with multiple lenders, apply and compare quotes, even if your current mortgage lender says you’re eligible to refinance.
2. Use a Cosigner
Another option is to use a friend or family member as a cosigner on your mortgage refinance loan. Your cosigner must be at least 18 years old, have a valid Social Security number, and meet all minimum requirements for the loan.
Keep in mind that the cosigner is taking a major risk and is legally responsible for your debt if you stop making payments. This could also hurt your cosigner’s credit score.
3. FHA Refinance Programs
The FHA offers several refinance options for homeowners with bad credit. An FHA loan is a mortgage that is backed by the U.S. government and issued by a bank or other approved lender.
Here are some options:
FHA rate-and-term refinance: The FHA rate-and-term refinance requires a credit check and a minimum credit score between 500 and 580, depending on your LTV ratio. You also need to prove that you’ve made 12 consecutive monthly mortgage payments on time.
FHA streamline refinance: An FHA streamline refinance has two options: credit qualifying and non-credit qualifying. A non-credit qualifying streamline refinance doesn’t have a minimum credit score but you may pay a higher interest rate. With a credit qualifying streamline refinance, the lender will run a credit check and verify your DTI ratio.
FHA cash-out refinance: You can borrow up to 80% of your home’s value with a credit score as low as 500, but some lenders may require a higher score.
FHA 203(k) refinance: This is a type of refinancing that enables homeowners to combine renovation expenses into the total amount of the new mortgage. The FHA accepts credit scores as low as 580, although some lenders might require a score of 620 or higher to qualify for a 203(k) refinance loan.
4. VA Refinance
Servicemembers, veterans, or qualifying spouses may qualify for a VA loan backed by the federal government and issued by private lenders. The VA has no minimum credit score requirement, but the lender may require a credit score of 620 or higher.
There are two VA refinance options:
VA streamline refinance: If you’re eligible, you can refinance with bad credit with an Interest Rate Reduction Refinance Loan (IRRRL). The IRRRL must be used to refinance your existing VA-backed home loan and while the VA doesn’t require a new credit check, the lender may be different.
VA cash-out refinance: You can use the VA cash-out refinance to tap your home’s equity, but you must meet the VA’s — and the lender’s — credit and income requirements.
5. USDA Streamlined Assist Refinance
The USDA’s Streamlined Assist program gives current USDA direct and guaranteed home loan borrowers with low or no equity the ability to refinance for a lower interest rate and lower monthly payments. No credit review is required, but you must have made at least 12 consecutive mortgage payments and meet income eligibility standards.
How to Improve Your Credit Score to Refinance a Mortgage
There are several things you can do to improve your credit score before refinancing your mortgage.
Raising your credit score by just 20 points can potentially lower your monthly mortgage payments and save you thousands on interest.
Here are a few options:
Check your credit report: You can check your credit report for free once per year with the three major credit bureaus — Experian, Equifax, and TransUnion — to see what’s keeping your credit score so low. You can also check for errors, unauthorized charges, and fraud, which could be lowering your credit score. If you find any issues, you can dispute them with the credit bureau.
Pay down debt: Your DTI is another factor that lenders will consider. Try to keep your DTI under 43%.
Make payments on time: Your credit score is heavily influenced by your payment history. A single missed payment can significantly lower your credit score. Payment history accounts for 35% of your FICO credit score.
Save money: Build your savings to make a larger down payment or keep the extra cash reserves to potentially lower your level of risk to lenders.
Explore Your Refinance Options with Total Mortgage
Even if you have a low credit score, this doesn’t mean that you are disqualified from refinancing your loan. Consult with a Total Mortgage advisor to explore all your mortgage refinance options.
Find an expert near you or apply for a refinance loan online!
The VA streamline refinance is the quickest, cheapest, and most beneficial type of refinance for veterans who currently have a VA home loan. VA refinance rates are at historic lows. If you are interested in reducing your interest rate and monthly payment, it’s worthwhile to check current VA streamline rates.
The VA streamline is one of the only refinance programs available in 2023 that allow you to qualify without income or bank account verification. It’s available to those with less than perfect credit. It is one of today’s quickest and easiest refinance options.
Check today’s VA streamline refinance rates by completing this quick online form.
What is a VA Streamline Refinance Loan?
The VA streamline helps veterans lower their mortgage rate and payments. When rates are low like they are now, veterans can refinance into a new loan based on today’s rates, and often reduce their monthly payment quickly and easily.
This loan type, also called the Interest Rate Reduction Refinancing Loan (IRRRL) eliminates many of the roadblocks that hold up applicants on other types of refinances. The VA Streamline is much easier because:
No paystubs or W2s are required
No bank statements are required
No home appraisal is required
There is no loan-to-value limitation because no appraisal or value is required.
Underwater homes are eligible
The required funding fee is lower than for VA purchase loans
Closing costs can be wrapped into the new loan, meaning little or no out-of-pocket expenses
Get a VA streamline rate quote here, no obligation.
Why is this loan so easy to obtain? Homeowners with a VA loan are more likely to make payments on time if their payments are lower. It benefits everyone when veterans have affordable mortgage payments.
Current VA Refinance Rates
VA streamline refinance rates are at historic lows. Many Veterans who have purchased or refinanced a VA home loan in the past few years should check today’s VA rates to make sure they have the absolute lowest rate and monthly payment possible.
Click here for a free VA streamline rate quote.
Eligibility
If you’re interested in a VA Streamline (IRRRL) you must currently have a VA loan. Your mortgage professional will pull a Prior Loan Validation from VA’s website to prove current VA loan status. There are some additional requirements.
On-Time Payments
In addition, you are required to have made on-time payments over the past year, with no more than one payment that was 30+ days late in the past 12 months. If you did have a late payment, say, 8 months ago, you may want to wait 4 months before applying.
The VA Streamline Refinance Must Improve Veteran’s Situation
The VA streamline has to put the borrower in a better financial situation. VA lenders may only approve streamline refinances that help the veteran.
The new payments on the VA streamline must be lower than your current payments. There are a few exceptions, like when you:
Refinance an adjustable rate mortgage (ARM) to a fixed rate mortgage.
Refinance into a shorter term
Finance energy efficient improvements into the VA streamline
In all cases except for an ARM refinancing into a fixed rate, the interest rate must decrease.
Estimate how a VA loan could drop your monthly payments.
Check VA streamline refinance rates here.
To prove the benefit of the refinance, your lender will provide you with a form stating the interest rate and payment of your current loan compared to the rate and payment of the new loan. The form will also state how long it will take the refinance to pay for itself. For instance, if the refinance will cost you $3000 in closing costs, but you are saving $300 per month, you will make back the cost of the refinance in 10 months. Be sure to review this form to make sure you are receiving an adequate benefit from the refinance. Talk to one of our VA experts to determine your refinance payback time frame.
Occupancy
You must certify that you previously occupied the home that you are refinancing with a VA streamline. Those applying for a VA streamline are more likely to qualify if they currently live in the home.
There are still instances where you may still qualify if you don’t live in the home. For example, if you lived in the home, then relocated and rented it out, you still may be able to apply for a VA streamline. Speak with your lender for more information.
VA Streamline Funding Fee
The VA funding fee is required for most purchase and refinance VA loans to defray the costs of the VA home loan program. In most cases, the VA Streamline funding fee is 0.50% of the new loan amount. This fee can be financed into the loan so that the veteran does not have to pay it at closing of the loan.
Check today’s VA rates.
The fee is waived for veterans who are disabled due to service-related injuries. The VA makes this determination and provides it to the lender.
The 0.50% fee is much less than the 2.15% or 3.3% usually required for purchase or VA cash-out refinance loans.
Subsequent Use
The VA streamline is not viewed as a subsequent use of your VA home loan benefit. You will not incur the 3.3% subsequent use fee because you used the VA streamline refinance program.
Entitlement
This loan does not use any of your VA home loan entitlement, nor do you have to prove remaining entitlement to obtain a VA streamline. Your remaining VA entitlement after a purchase of the home, if any remains, does not change when you obtain a VA streamline.
Loan Terms and VA Streamlines
As discussed previously, your VA loan term may decrease, for instance, from 30 years to 15 years. In this case, it’s OK that your payment increases.
You can also refinance a 15-year loan into a longer-term loan. However, keep in mind that the most your loan term can increase is 10 years. So if you currently have a 15-year term, the longest loan you can refinance into will be 25 years.
Complete a short online form to get a free rate quote and see how much you can save.
I’m Ready to Apply for a VA Streamline. What’s my Next Step?
Call (866) 240-3742 or simply complete our online form for a free, no obligation VA streamline rate quote. Rates are low and it’s a great time to lower your home payment.