Your First VA Home Loan: A Step-by-Step Guide for First-Time Buyers

Congratulations! You’ve served our country, and now you’re ready to embark on one of the most exciting journeys of your life: buying your first home. For active-duty service members, Veterans, and eligible surviving spouses, the VA home loan is an earned benefit that can make this dream a reality with incredible advantages like no down payment and no private mortgage insurance.

While the benefits are clear, the homebuying process itself can feel daunting, especially for a first-time buyer. Many people focus on finding the perfect house and getting a great rate, but they often overlook crucial details that can make or break a deal.

At VeteransLoans.com, we are dedicated to guiding you through every step of this journey. We’ve helped thousands of military families purchase their first home, and we know that a smooth process starts with being prepared. This comprehensive guide will walk you through the essential steps, highlight key details often overlooked, and ensure you are ready to make a successful offer.

Step 1: Getting Your Financial House in Order

Before you start house hunting, it’s vital to get a clear picture of your financial standing. While the VA loan program is more flexible than conventional loans, lenders still have their own requirements for credit and income.

• Check Your Credit Score: The VA does not set a minimum credit score, but most lenders require a score of at least 620 to qualify for a VA loan. A higher score will also likely lead to a better interest rate. Take the time to review your credit report for any errors and work to improve your score if needed.
• Reduce Debt: The Debt-to-Income (DTI) ratio is a key factor lenders use to determine your ability to repay a loan. This ratio compares your total monthly debt payments (including the new mortgage payment) to your gross monthly income. While the VA doesn’t have a strict DTI limit, they use a “residual income” calculation to ensure you have enough money left over each month for living expenses. Minimizing your debt will improve both these metrics and increase your borrowing power.
• Save for Closing Costs: A common misconception is that a VA loan means no money out of pocket. While there is no down payment required (for eligible Veterans with full entitlement), you will still have closing costs. These fees, which typically range from 2% to 5% of the loan amount, cover items like the appraisal, title insurance, and other administrative expenses. While a seller may agree to pay some or all of these costs (up to 4% in concessions), you should still be prepared to cover them yourself if necessary.

Step 2: Securing Your Certificate of Eligibility (COE)

The Certificate of Eligibility, or COE, is the most crucial document for a VA loan. It proves to lenders that you have met the VA’s service requirements and are eligible for the benefit.

• How to get a COE:
  • Let Your Lender Handle It: This is the easiest and most common method. As a VA-approved lender, VeteransLoans.com can typically obtain your COE electronically within minutes.
  • Online Through the VA: You can apply for your COE directly on the VA’s eBenefits portal.
  • By Mail: You can fill out and submit VA Form 26-1880, but this method takes longer.
• What You’ll Need:
  • Veterans: Your DD Form 214, Report of Separation.
  • Active-Duty Service Members: A current Statement of Service signed by your commander or personnel officer.
  • National Guard/Reserve Members: NGB Form 22 (Report of Separation) and NGB Form 23 (Retirement Points Accounting).

Securing your COE is a non-negotiable step and should be one of the first things you do. Our team can help you with this process and can provide more details on the VA loan eligibility requirements.

Step 3: The VA Loan Pre-Qualification and Pre-Approval

Many people confuse these two steps, but they are very different. Both are critical for a successful home purchase.

• Pre-Qualification: This is a preliminary, non-binding step where you provide a lender with basic financial information (income, debt, assets). Based on this, the lender gives you an estimate of how much you can afford. It’s a great starting point for establishing your budget.
• Pre-Approval: This is a much more thorough process where a lender verifies your financial information by reviewing documents like your W-2s, pay stubs, bank statements, and credit report. This results in a pre-approval letter, which is a conditional commitment to lend you a specific amount.

Why pre-approval is so important:

• It tells you exactly what you can afford, preventing you from falling in love with a home that is outside your budget.
• It makes you a more serious and attractive buyer to sellers in a competitive market.
• It gives you an edge over other buyers who are only pre-qualified.

You can start the pre-qualification process easily with us online or over the phone.

Step 4: Finding Your Home and Overlooked Property Requirements

This is the fun part! You have your pre-approval letter, and now you can start house hunting with a qualified real estate agent who has experience with VA loans.

As you look at homes, it’s crucial to understand a key detail that is often overlooked by first-time buyers: the VA Minimum Property Requirements (MPRs).

The VA’s Minimum Property Requirements (MPRs)

The VA doesn’t want you to buy a home that is unsafe, unsanitary, or structurally unsound. Their MPRs are designed to protect you by ensuring the home is a safe and livable environment. These requirements are assessed during the VA appraisal, which is a required step in the loan process.

• Safety: The home must be safe for its occupants. This includes having a working and safe electrical system (no exposed wires), proper stair railings, and an absence of lead-based paint hazards in homes built before 1978.
• Structural Soundness: The home’s foundation, roof, and walls must be in good condition. The VA appraiser will look for signs of significant structural damage, such as a sagging roof, a cracked foundation, or active leaks.
• Sanitation: The property must have a safe and sanitary waste disposal system (e.g., connected to a public sewer or a functioning septic system). It must also have a clean, continuous supply of safe drinking water and a functioning water heater.
• Functionality: All systems—plumbing, electrical, and heating—must be in working order. The home must have a permanently installed heating source that can maintain a temperature of at least 50 degrees Fahrenheit. While air conditioning is not required, if a unit is installed, it must be functional.
• Pest-Free: The property must be free of wood-destroying insects like termites, as well as other pest infestations.
• Access: The home must have safe, all-weather access from a public or private street. The property also needs proper drainage to prevent water from pooling near the foundation.

A Common Mistake: Many buyers confuse a home inspection with a VA appraisal. A home inspection is a separate, optional (but highly recommended) step that provides a more detailed report on the home’s condition. The VA appraisal is strictly to ensure the home meets the VA’s MPRs and to determine the property’s market value. A failed VA appraisal can kill a deal, so it’s essential to be aware of the MPRs when you’re making an offer.

Step 5: The Offer, Appraisal, and Underwriting Process

Once you find a home you love that meets the VA’s requirements, you’ll make an offer. With your pre-approval letter in hand, your offer will be stronger.

• Offer and Purchase Agreement: Your real estate agent will help you draft an offer, which includes the price, contingencies (such as the home inspection and appraisal), and a proposed closing date.
• The VA Appraisal: After your offer is accepted, your lender will order a VA appraisal. An independent, VA-certified appraiser will visit the property. They will assess its value and ensure it meets the VA’s MPRs. If the appraisal comes in lower than the purchase price, you may need to renegotiate with the seller or pay the difference out of pocket. If the appraiser finds MPR violations, the seller must make the necessary repairs before the loan can close.
• Underwriting: This is where the lender’s underwriter reviews your entire loan file, including your financial documents and the appraisal report, to ensure everything meets VA and lender guidelines. This is where your pre-approval turns into a final loan commitment.
• Don’t Change Your Finances: While in underwriting, it is critical not to make any major financial changes. This includes:
  • Taking on new debt (e.g., buying a car, opening a new credit card)
  • Quitting your job or changing professions
  • Making large, unexplained cash deposits into your bank accounts

Any of these actions could jeopardize your loan approval.

Step 6: Closing Day and Beyond

Once your loan is cleared to close, you’re on the home stretch! Closing is the final step where you sign all the legal documents and officially become a homeowner.

• Final Walkthrough: Before closing, you’ll do a final walkthrough of the home to ensure any agreed-upon repairs have been completed and that the property is in the same condition as when you made your offer.
• Signing: At the closing table, you will sign a series of documents, including the closing disclosure, which details all the final costs and fees.
• Homeownership: Once the funds are disbursed and the transaction is recorded, you get the keys!

Ready to Begin Your Journey?

Buying your first home with a VA loan is an incredible benefit you’ve earned. While the process has many steps and details, working with a knowledgeable and experienced VA lender is the key to a smooth and successful experience. Our team at VeteransLoans.com specializes in VA loans and is ready to be your partner. We understand the nuances of the VA’s requirements and will guide you every step of the way, from securing your COE to closing on your new home.

Don’t let the process feel overwhelming. We are here to simplify it for you.

• Get Pre-Qualified Today: The first step is to get a free, no-obligation pre-qualification to see what you can afford. Visit veteransloans.com/prequalify.
• Call a VA Loan Specialist: For personalized advice and answers to all your questions, call us at 1 (888) 232-1428.

Your service has earned you this benefit, and we are honored to help you use it to find your perfect home.