The Veterans Affairs (VA) Loan Purchase Process

Veterans, active-duty military, and surviving spouses may be eligible to buy a home using a Veterans Affairs (VA) loan. These government-backed home loans are provided by private lenders, but because the VA guarantees a portion of the loan, the lender is often able to offer more favorable terms when compared to other loan options.  

For those considering using their hard-earned VA loan benefits, it’s important to understand how that loan process works. It has a lot in common with other loan types but a few key differences that borrowers should be aware of. In this article, we will give you a high-level overview of the VA loan purchase process, so you can move more confidently through your home search.

Benefits of using a VA loan to purchase a home

Some of the benefits of using a VA loan to purchase a home include:  

• 100% Loan-to-Value (LTV) on purchases up to the FHFA 1-Unit Conforming Loan Limit, meaning no down payment is needed 

• The mortgage being assumable 

• No private mortgage insurance (PMI) 

• No pre-payment penalty 

Those are a few of the reasons why eligible veteran borrowers should consider using their VA loan benefits to buy a house. The program was designed to help veterans become homeowners, and it can also help them throughout the life of their loan with favorable cash-out refinancing terms and a streamline interest rate reduction refinance loan (IRRRL).

VA loan purchase steps

The VA loan process may vary slightly depending on your lender, the type of home you’re buying, or your financial situation. However, generally speaking, the VA home loan process follows these steps:

Step 1: Review your finances and eligibility

Before you commit to your home search, you should figure out what you can actually afford. Look at your credit, debt, income, monthly expenses, and other financial information to determine whether you are ready to buy a home and how much home you might be able to afford.

Step 2: Find your preferred lender

Search for a VA-approved lender to work with through the home loan process. You may want to shop around different lenders to compare rates until you find the option that’s most suitable for your situation.  

Every lender will have their own distinct interest rates, fees, and standards of service. Remember, this is an institution and banker that you will be working closely with throughout your VA loan process, so make sure you feel comfortable with that team.  

You will also likely want to find a real estate agent here, too, if you have not already. Speak with family and friends, or even your lender, to find a real estate agent you can trust—ideally one who is familiar with VA loans.

Step 3: Apply for a Certificate of Eligibility (COE)

The Certificate of Eligibility (COE) is your proof from the VA that you are qualified to use your VA loan benefit. Now, veterans are able to apply for their COE themselves, and if you wish to do so, you can start that application process before you find a lender. However, know that your lender should never require you to obtain the COE on your own.  

It may be beneficial for you to work with your lender to acquire your COE, as they are likely to be more familiar with the process and able to guarantee the integrity of the document. To get your COE, you will need to submit documents such as: 

• DD 214 for Active-Duty Service Members and Reservists that indicates Character of Service 

• NGB 22 for National Guard members that indicates Character of Service 

• Driver’s license or other government-issued identification 

• Income information, such as a W-2 or pay stubs 

Find more information on the VA’s eligibility requirements here.

Step 4: Get pre-approved for your VA loan

Pre-approvals are a useful tool to show sellers and agents that you are likely to be eligible for a mortgage loan and are therefore a more serious option as a buyer. A pre-approval for your VA home loan is not a commitment to lend, and it expires 90 days from the date of issuance.  

As the applicant, you must authorize the bank to obtain a credit report and analyze your financial history to determine your potential eligibility for a home loan. Once this process is complete, the lender will determine how much you can borrow and at what interest rate. If you are pre-approved, you will receive a pre-approval letter, which you can then show to sellers.

Step 5: Shop for your home

Now comes the fun part. Equipped with your pre-approval letter, you get to begin your home search in earnest. Your real estate agent can help you find properties that check your boxes and are likely to meet eligibility requirements from the VA. Then, once you’ve found the home you’d like to buy, you can work with your agent to build a strong offer and negotiation strategy.

Step 6: Sign a purchase agreement

Once you and the seller have ironed out the terms of the home purchase, a purchase agreement will need to be drafted and signed. The VA asks that this agreement includes the “VA escape clause,” which makes the contract voidable if the property doesn’t appraise for agreed upon price.  

Additional contingencies should be discussed with your agent and negotiated on in this agreement. The purchase agreement should not be confused with your final contract. Consider it a preliminary contract buy the home.

Step 7: VA home appraisal and home inspection

The lender will order a VA-approved appraiser to come and determine the value of the home. This appraiser will also assess the property to determine whether it meets the VA’s minimum property requirements (MPRs). For the sale to move forward, the property must meet these MPRs, as the VA does not want to guarantee a loan for an unsafe, unsanitary, and unlivable property.  

Note, though, that this appraisal is not the same as a home inspection. It is generally a smart move to hire a home inspector to search for any major defects before buying the home. These are things the appraiser may not find and could prove very costly if they are missed.

Step 8: Underwriting

Your lender’s underwriting team will review all of your loan documents and financial information to make the final approval or denial decision on your loan. Some documents to be reviewed here include:  

• Discharge & Separation Documents 

• Most recent 30 days of pay history 

• Most recent two years tax returns  

• Most recent two years W-2 statements 

• Most recent two monthly asset statements 

• Credit explanation letters, bankruptcy paperwork, divorce papers if applicable 

• Fully executed purchase agreement

Step 9: Closing

Once approved, you will begin the closing process on your VA home loan. This step typically involves a lot of paperwork, and it’s important that you review everything carefully to understand what you are signing. Expect to receive a closing disclosure breaking down your closing costs, which usually include a VA funding fee. 

After you’ve reviewed and signed your closing documents, you can finally get the keys to your new home. Then comes the conclusion to the VA loan purchase process, the reward for all of this hard work: You get to move into your new home!  

Good luck in your homebuying journey! 

Now that you have a high-level understanding of the typical steps involved in the VA loan purchase process, we hope you can move forward more confidently through your homebuying journey. As exciting as that is, the process can feel overwhelming at times. Be sure to find a trustworthy VA-approved lender who can guide you through this process.