Best VA Mortgage Lenders of 2021

If you meet the requirements for a home loan backed by the Department of Veterans Affairs, you could get a mortgage without making a down payment: one of the program’s main benefits. The VA guarantees a portion of your loan, which means your mortgage could have better terms than most others.

Here’s more about VA home loans and how to find the best VA mortgage lender for your needs.

Locking in a low mortgage rate today can save you thousands over the life of your loan. Compare your mortgage rate offers with national average trends.

The VA doesn’t lend money with VA loans, but it does offer a guarantee. You borrow from a private VA mortgage lender, and the government guarantees payment for a portion of your mortgage. If your loan is more than $144,000 and you default, the VA will pay the lender up to a quarter of the loan amount.

This guarantee reduces risk for lenders and allows borrowers to obtain competitive interest rates and terms, including buying with no down payment and private mortgage insurance.

You do not have to be a first-time homebuyer to use a VA loan. As long as you qualify for VA loan benefits, you can use them as many times as you would like. However, the VA loan must be used to purchase a primary residence and not a vacation home or investment property.

1. Purchase loan: Put no money down and borrow up to the conforming loan limit in most areas – more in some high-cost locations – to build, buy or improve a home. You won’t need private mortgage insurance, which is usually required on a conventional loan when you don’t make at least a 20% down payment.

2. Interest rate reduction refinance loan: An IRRRL, often called a streamline refinance, replaces your VA-backed loan with a new one and different terms that reduce or stabilize your mortgage payments. Pay attention to your closing costs, dividing estimated costs by expected monthly savings, to determine whether to proceed.

3. Cash-out refinance loan: This loan may help you take cash out of your home equity to pay off debt, remodel or help with college expenses. Borrowers can also choose this option to refinance a non-VA loan into a VA-backed loan. You can borrow up to the conforming loan limit with no down payment in most areas, but keep refinancing costs in mind.

4. Native American Direct Loan: If you’re a veteran and either you or your spouse is Native American, this program may help you buy, build or improve a home on federal trust land. An NADL may also be refinanced to reduce your interest rate. Borrowers need to meet the VA’s eligibility criteria for an NADL, including credit and income standards.

You will need to meet service or discharge criteria to qualify for a VA loan. You may also be eligible as a spouse of a veteran or in other situations.

When you apply for a VA loan, you will need to present a Certificate of Eligibility, or COE, from the VA to the lender to show you qualify for the program.

You can apply for a COE online, by mail or through your lender using the VA’s web-based system. Applying by mail may take longer than the other two options.

In addition to military service requirements, you must meet the VA mortgage lender’s income, credit score and other conditions to qualify for the loan.

The VA sets no minimum credit score, but lenders typically expect a score of at least 620.

The lender will also consider your debt-to-income ratio, which is the percentage of your gross monthly income spent on debt payments. Most lenders prefer a DTI of 43% or lower.

Consider these five key factors to help you select the best VA mortgage lender for your needs:

1. Annual percentage rates, or APRs. The APR reflects the interest rate, plus fees and closing costs, and it tells you the true cost of borrowing. Shop around, and compare quotes from different VA lenders. You can compare APRs on loan estimates, which break down on Page 3 how much of a loan you will pay off after five years.

2. Closing costs. Lenders can charge a number of closing costs to set up VA loans, including funding, origination and administrative fees. When you add up these costs, the loan with the lowest interest rate might not be the best VA home loan overall. This shows why you want to compare APRs and not just interest rates.

3. Products. Loan options depend on the VA mortgage lender. However, VA loans often have the same terms as conventional mortgages: They can come with fixed or adjustable rates and last up to 30 years.

4. Eligibility requirements. VA loan criteria are consistent when it comes to military service, but VA lenders could have different credit and income requirements. Most lenders have a minimum credit score and a maximum debt-to-income ratio to qualify.

Applying for a VA loan is nearly identical to applying for a conventional mortgage, except for VA forms.

You will need to apply for and receive your COE, which you provide to the lender as proof that you meet the service requirements for a VA loan. If you’re a veteran, you must also submit your DD Form 214, Certificate of Release or Discharge from Active Duty.

Another difference is that a VA-certified appraiser inspects the home to make sure it meets the VA’s minimum property requirements and is acceptable for a loan.

Here’s more information about the mortgage timeline to have a better idea of what to expect.

Make sure you understand the pros and cons of a VA loan to help you decide whether to use one.