VA loan basics, in plain English
This page covers how the VA home loan works for a purchase near JBLM: eligibility, entitlement, the funding fee, the appraisal, and using the benefit more than once.
Battle Buddy is not a mortgage lender and does not make loans or credit decisions. Not affiliated with or endorsed by the U.S. Department of Veterans Affairs or the Department of Defense.
This is general education written by a real estate broker. VA rules change and every file is different, so confirm the specifics of your situation with a VA-approved lender.
What is a VA home loan?
A VA home loan is a mortgage made by a private lender and partly backed by the Department of Veterans Affairs.
The lender is a bank, a credit union or a mortgage company. The VA’s guaranty covers part of the loan if it ever goes bad, and that backing is what lets lenders offer terms most buyers can’t get: in most cases no down payment and no monthly mortgage insurance. The VA doesn’t lend the money itself or pick the house, though the house does have to meet the VA’s minimum property requirements.
Eligibility comes from service: active duty, veterans, members of the National Guard and Reserve, and some surviving spouses can qualify, under rules that depend on when you served, for how long, and how you separated. The loan is for a home you’ll live in, and it can be used for a house, a condo in a VA-approved project, or a building of up to four units if you live in one of them.
How do I get a Certificate of Eligibility?
The Certificate of Eligibility, or COE, is the document that tells a lender you have VA loan entitlement and how much. It’s the first thing a lender will want.
Most VA-approved lenders can request it electronically for you, often in the same sitting as your preapproval conversation. You can also request it yourself through VA.gov. Active duty service members generally need a statement of service signed by their command if the system can’t confirm eligibility automatically, and veterans may need a copy of their DD-214. National Guard and Reserve members have their own documentation rules.
Get the COE before you start touring homes. If there’s a problem with it, such as entitlement still tied to a home you sold years ago, you want to find out while you have time to fix it.
What is entitlement, and how much can I borrow?
Entitlement is the portion of a loan the VA will back. It determines how much you can borrow without a down payment. It doesn’t decide what you can afford. The lender decides that from your income, your debts, the VA’s residual income guideline and your credit.
Full entitlement
If you’ve never used the benefit, or you used it and had your entitlement restored, you generally have full entitlement. Since 2020, borrowers with full entitlement are not subject to a VA loan limit, which means no down payment is required as long as the lender approves the amount and the home appraises at or above the price.
Partial entitlement
If part of your entitlement is still in use, typically because you kept a home bought with a VA loan, you have what’s called remaining entitlement. County loan limits come back into the calculation, and above a certain amount you may need a down payment. This comes up often with PCS moves, when a family keeps the last house as a rental and buys again near JBLM. It’s workable. The lender just has to run the numbers before you shop.
The VA funding fee, and who is exempt
Most VA borrowers pay a one-time funding fee. It’s a percentage of the loan amount set by the VA, and it varies with the type of loan, the size of any down payment, and whether this is your first time using the benefit. It can be paid at closing or added to the loan.
Several groups are generally exempt. You typically don’t pay the funding fee if you:
- Receive VA compensation for a service-connected disability.
- Are eligible for that compensation but receive retirement or active duty pay instead.
- Are a surviving spouse receiving Dependency and Indemnity Compensation.
- Are an active duty service member who has received the Purple Heart.
- Are a service member with a proposed or memorandum rating, issued before closing on a pre-discharge claim, showing eligibility for compensation.
The exemption shows up on your Certificate of Eligibility. If you believe you qualify and the COE says otherwise, sort it out with the lender and the VA before closing, while it’s still easy to correct.
Down payment and mortgage insurance
With full entitlement, the VA doesn’t require a down payment as long as the price isn’t more than the appraised value. You can put money down anyway. It lowers the loan amount and the monthly payment, and larger down payments reduce the funding fee for those who pay it.
VA loans don’t carry monthly mortgage insurance, the extra charge most conventional loans add when a buyer puts down less than a fifth of the price. On a no-down-payment purchase, that difference shows up in every monthly payment.
You’ll still have closing costs, property taxes, homeowners insurance and, in some neighborhoods, HOA dues. The VA limits certain fees a veteran can be charged, and sellers can contribute toward a buyer’s costs within VA limits. Ask your lender for an estimate of your cash to close early, so there are no surprises the week you sign.
The VA appraisal and minimum property requirements
Every VA purchase gets a VA appraisal. Your lender orders it through the VA’s system, and the VA assigns an appraiser from its panel. The appraiser does two jobs: estimates market value, and checks the house against the VA’s minimum property requirements, often called MPRs.
MPRs exist to make sure the home is safe, structurally sound and sanitary. On older South Sound houses and rural lots, these are the ones worth checking before you write an offer:
- A roof with reasonable remaining life and no active leaks.
- A working heat source adequate for the house.
- Safe drinking water and a working sewage system, including wells and septic on rural lots.
- No peeling or chipping paint on homes built before 1978, where lead paint is possible.
- Crawlspaces and attics that can be accessed, and no standing water or obvious structural problems.
- Safe stairs, rails and electrical, and access to the property from a street.
If the appraiser calls for repairs, they generally have to be completed before closing, usually by the seller, and the appraiser or lender confirms them. The appraisal is not a home inspection, and it isn’t meant to be. Hire an inspector.
If the appraisal comes in low
Every VA purchase agreement carries the VA escape clause: if the appraised value is below the price, you can renegotiate or walk away without losing your earnest money. You can also choose to pay the difference in cash. Before a low value is final, the VA’s process generally gives the agent or lender a short window to send the appraiser additional sales, which is one reason your agent should have comparables ready.
Using the VA benefit more than once
The benefit can be used again. Many military families use it at more than one duty station, in one of four ways.
Sell and restore. When you sell a home and the VA loan is paid off, you can have your entitlement restored and start fresh.
Pay off and keep. If you pay off the VA loan but keep the house, you can generally have your entitlement restored one time.
Keep the loan, buy again. If you keep the earlier home with its VA loan in place, you may still have remaining entitlement to buy near JBLM. This is common for families who turn the last house into a rental.
Assumption. A qualified buyer can assume your VA loan when you sell. If that buyer is a veteran who substitutes their own entitlement, yours can be restored. If not, part of yours stays in use until the loan is paid off.
Each new VA loan still requires that you intend to live in the home. The VA generally expects occupancy within a reasonable time after closing, and a spouse can often satisfy the requirement when the service member is deployed or away on orders.
Common questions about VA loans near JBLM
Can I really buy a house with no down payment using a VA loan?
In most cases, yes. With full entitlement, the VA doesn’t require a down payment as long as the price doesn’t exceed the appraised value and the lender approves the loan amount. You’ll still need money for closing costs unless the seller or lender covers them, and you may choose to put money down anyway.
Do veterans with a disability rating pay the VA funding fee?
Generally no. Veterans receiving VA compensation for a service-connected disability are exempt from the funding fee, along with several other groups, including Purple Heart recipients on active duty and surviving spouses receiving Dependency and Indemnity Compensation. The exemption should appear on your Certificate of Eligibility; confirm it with your lender.
Is there a limit on how much I can borrow with a VA loan?
If you have full entitlement, the VA doesn’t set a loan limit, though your lender still decides what you qualify for based on income, debts and credit. If part of your entitlement is in use on another home, county loan limits factor into how much you can borrow without a down payment.
Can I have two VA loans at the same time?
Often, yes. If you keep a home bought with a VA loan and still have remaining entitlement, you may be able to use it for a second VA loan on a new primary residence near JBLM. A lender has to calculate what remains, and a down payment may be required above a certain amount.
Can my spouse buy the house while I’m deployed or in the field?
Usually, with planning. A spouse can often satisfy the VA’s occupancy requirement, and signing can be handled with a power of attorney if the lender and title company accept it. Ask about the exact POA wording early, because many lenders require specific language for a VA loan.
Does BAH count as income for a VA loan?
Lenders generally count Basic Allowance for Housing as income when you qualify, along with base pay and other regular allowances. How much weight it gets, and how the lender treats a pay change that comes with the move, varies, so ask each lender you talk to.
What happens if the VA appraisal comes in below the purchase price?
The VA escape clause lets you renegotiate or cancel without losing your earnest money. You can also pay the difference in cash if you want the house. Before the value is final, the VA process generally allows a short window for the agent or lender to send the appraiser more sales data.
Is there a minimum credit score for a VA loan?
The VA itself doesn’t set a minimum credit score. Individual lenders set their own standards, and they differ, which is one good reason to talk to more than one VA-approved lender before you decide.
Talk to a lender, then talk to me
The order matters. A lender can tell you what your benefit looks like on paper. I can tell you what that buys in Lakewood, DuPont, Spanaway or Yelm, and how to make an offer that a seller takes seriously. If you don’t have a lender yet, I’ll introduce you to a few who close VA loans regularly, and you choose.