If you work for the military then you have definitely heard your colleagues talking about VA Loans. These mortgages are a special program that caters to members of the military and veterans, they come with strict requirements of eligibility but also amazing benefits that might not be available to non-military members of society.

Here is everything that you need to know about VA loans, how they work, and what you need to have for eligibility.

What are VA Loans?

The “VA” in “VA Loans” stands for Veterans Affairs from the Department of Veteran Affairs. That is the government office that created the loan program specifically for military members, veterans, and their spouses. These loan programs do not extend to anyone that isn’t or has not been a member of the US military.

The Department of Veteran Affairs guarantees the VA loan but does not provide any financing for the loan. The financing has to be arranged by third-party lenders and financial institutions like banks. However, due to the backing of the Department of Veteran Affairs, lenders will be confident about lending to those that meet the requirements of the loan. The backing of a government office allows lenders the confidence to extend services to people when they would have otherwise not.

How do VA Loans Work?

To qualify for a VA loan, the borrower has to meet the requirements. The requirements of eligibility are set by the Department of Veteran affairs. While many requirements for the VA loan are very lenient, such as low credit score requirements or not being a first-time homeowner, there are also many strict adherences that the borrower must meet. Such as only buying property for personal family use and having residual income at the end of every month.

Additionally, for an added measure, applying for a VA loan requires a Certificate of Eligibility which has to be obtained from the military administration. This certificate is confirmation from the military offices that the borrower meets the VA’s requirements.

>>More: What Is a VA Loan?

Who qualifies for a VA Loan?

When it comes to qualifying for VA loans, just being a member of the military is not enough. The borrower qualifies based on how long they have served in the military – as required by the Department of Veteran Affairs. They must meet at least one of the following criteria:

  • Served 90 consecutive days of active service during wartime
  • Served 181 days of active service during peacetime
  • Six years of service in the National Guard or Reserves
  • Be the spouse of a service member who has died in the line of duty or as a result of a service-related disability

What is a Certificate Of Eligibility (COE)?

The CEO is an official document that confirms that the borrower meets the VA’s requirements and qualifies for the VA Loan. The CEO can be obtained by submitting relevant documentation that depends on the membership of the military member.

What are the requirements for obtaining COE?

Depending on the membership situation in the military the way to obtain the Certificate of Eligibility (COE) varies:


Submitting their DD214 papers

Current or Former Activated National Guard or Reserves:

Submitting their DD214 papers

Active Duty Member:

Active members of the military need to obtain a statement of service signed by their commander or personnel officer. The statement should mention the following information:
Full Name
Social Security Number
Date of Birth
Date of entering duty
Duration of any lost time
Name of the command providing the information

Current National Guard or Reserves (Never Activated):

Same as the Active Duty Members, have to obtain their statement of service, signed by their commander or personnel officer.

Discharged National Guard (Never Activated):

They Will need to submit their NGB22 forms (Report of Separation and Record of Service) and NGB23 (Retirement Points Statement and Proof of character statement).

Discharged Reserves (Never Activated):

Need to submit a copy of the latest annual retirement points along with Proof of honorable service.

What are COE requirements for Spouses?

How the COE is obtained for Spouses of military members depends on whether they are receiving Dependency and Indemnity Compensation or not. But the general requirements include providing the following:

Copy of marriage license
Veteran’s Death Certificate or DD1300 – Report of Casualty
Veteran’s Separation paperwork or DD214

If the spouse is receiving Dependency and Indemnity Compensation then they need to fill out VA Form 26-1817 and if not receiving any compensation then they need to fill out VA Form 21P-534EZ and submit it to their State’s VA Pension Management Center.

Other VA Loan eligibility requirements

Some VA loan conditions can be more stringent. The VA requirements, for example, mandate the applicant to have residual savings at the end of each month, which ensures that they can preserve some of their earnings every month. The property under application must meet the conditions outlined in the VA rules, and it must also be bought for personal purposes only. Additionally, the borrower must satisfy the requirements of lenders for credit scores, DTI, etc.

VA Loan benefits

VA comes with a huge list of amazing benefits, such as:
– The interest rates on VA loans are lower than typical loans
– The VA Office provides assistance to avoid situations of loan defaulting
– VA loans have lower closing costs
– VA loans have 100% LTV
– Closing costs can be covered by sellers
– Early repayment of the loan does not incur penalties
– PMI is not required when you take out a VA loan
– Usually, a down payment is not required for VA loans
– Applicants can apply for a VA loan even if they already own a home

Additional benefits for disabled veterans

Some of the closing costs such as “Funding Fees” do not apply for disabled veterans and in addition to this, they also qualify for many grants that are made specifically around the needs of disabled veterans such as the SAH or TRA grants, which are used for constructing and modifying houses to match the disabled needs of veterans.

How to apply for a VA Loan: 6 Steps

With the exception of the administrative requirements of VA loans, the steps beyond that are the same as for other mortgage programs:

Obtain the Certificate of Eligibility (COE): The applicant obtains the CEO by following the requirement of their membership.

Pre-Approval: The applicant consults a loan officer and they establish a baseline for an affordable property value

Shop for a House: The applicant shop around for houses that meet their needs

Make an Offer: The applicant makes an offer for the purchase of a house that they like

Appraisal and Underwriting: The applicant’s financial reports are studied to confirm they will be able to afford the mortgage and their preferred property is appraised to make sure it meets the local building codes

Closing and getting the keys to the new home: The applicant covers the closing fees, signs a few final documents, and obtains the keys to their home.

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