Approval of VA Lenders

VA loan mortgages offer exceptional benefits exclusive to military servicepersons and veteran borrowers. However, these loans cannot be acquired from all lenders; rather, VA-eligible borrowers must find VA lenders who have been approved by the Department of Veteran Affairs (VA) to finance their home purchases and refinances.

While many lenders have the authorization to issue VA mortgage loans, not all lenders have experience with these loans, and thus borrowers should shop around and carefully consider their options to find the right VA loan lender. 

In fact, many mortgage professionals choose to specialize in VA Loans to better differentiate themselves from other lenders.  

Many of these mortgage pros were veterans themselves in the past, so it makes it easier for them to communicate with their clients

The main feature that is attractive to many Vets is that VA loans can be 100% of the purchase price, and the max loan amount can be up to $1,500,000.00. Loans over $625,500 (in Colorado, it may be lower in other areas) are limited to 95% LTVV. 

VA loans are only available for owner occupied properties, although if the servicemember is actively deployed at the time of purchase, the spouse may occupy it.  If a service member is single and is temporarily deployed, he may buy with the intent he will occupy it once the deployment is over.

Some of the requirements to be eligible are that the applicant must have had at least 90-days active duty during wartime or 180 days during peacetime.  

Vets who were discharged for service related disability can have that requirement waived generally.  

Members of the National Guard that did not serve in the armed services long enough (or at all) are eligible after six years enlistment in the Guard.

A Vet must have good credit.  If the applicant has had a foreclosure or bankruptcy in the past, the applicant should discuss his situation with a lender up front to determine the impact of what happened on getting approved.

Income wise VA loans can allow for a higher debt-to-income ratio (DTI) than most loans.  DTI refers to the cost of the monthly house payment including principal, interest, taxes, insurance, and HOA fees plus the minimum due on installment, revolving and other debts divided into the gross pre-tax income of the applicant and his/her spouse.  

In some cases, this can be as high as 60% of the income, but a lower ratio, not over 50% is more common,  On Jumbo loan amounts 45% DTI is about tops.

VA loans also come with a funding fee which is paid to the Veterans administration for insuring the loans against default.  The one time VA funding fee ranges from 1.25% to 2.4% of the loan amount.  It varies with down payment, type of service history of the applicant and how many times the applicant has had a VA loan.   It can either be added to the loan amount or paid by the lender in exchange for a higher mortgage rate or paid by the seller as an incentive to the home buyer.

The seller of the property can contribute up to 4% of the purchase price towards paying the borrowers closing costs but cannot contribute funds to the down payment.

It also may be possible to borrow additional funds to make energy efficient improvements to the home after closing.  It must be arranged before closing, and there are lots of rules to it, but it can be a way to upgrade certain elements of the home such as new high windows, energy star rated appliances, a solar system or more insulation or caulking, amongst others.

Finding a VA Loan Lender

To find a VA mortgage lender, visit our Lender411 Find a Lender page, which conveniently connects borrowers to reliable, approved VA mortgage lenders.

When using an online lender search tool to locate VA lenders, always ensure that the lender still maintains VA approval to avoid potentially wasting time with ineligible lenders.

Shop Around

As with any loan program, shopping around and comparing lenders is highly advisable, and borrowers may be able to save thousands on a lower interest rate over the loan’s lifetime. 

With VA loans, however, finding the right lender may require some additional considerations:

• Experience – Due to the unique requirements and procedures for VA loans, borrowers should look for lenders with past experience handling VA mortgages.

• Specialization – While not absolutely necessary, VA loan specialists can provide excellent service to VA-eligible borrowers, with the best advice for loan programs and inherent knowledge of VA mortgages.

• Good Faith Estimate – When obtaining a VA mortgage, lenders will provide borrowers with a Good Faith Estimate (GFE) which divulges all the expected costs associated with issuing the loan, making it easier for borrowers to make comparisons from lender to lender.  A fee worksheet form is also used by many lenders to clarify the makeup of certain dollar totals shown on the GFE.

• Helpfulness – If a lender refuses to acknowledge or satisfactorily answer a borrower’s questions, he or she may be unreliable or inexperience. Rather, borrowers should look for borrowers who are insightful and willing to clarify any details of the program.

Gretchen Wegrich

Gretchen Wegrich is an editor at Lender411. She specializes in mortgage basics, personal finance and green living. She graduated with a bachelor's degree in writing from University of California, San Diego and previously worked at the Santa Cruz Sentinel. Contact her at gretchen@lender411com.