A VA home loan allows eligible veterans, service members, and certain surviving spouses to finance a qualifying home through a private lender with the backing of the U.S. Department of Veterans Affairs.
Quick answer: The VA does not typically lend the money for a VA backed purchase loan. Instead, a private lender provides the mortgage and VA guarantees a portion of the loan. Eligible buyers still apply with a lender, qualify financially, choose an eligible home, complete the VA appraisal and underwriting process, and close on the purchase.
How Does the VA Home Loan Process Work?
Buying a home with a VA loan involves many of the same steps as buying with other mortgage programs, but VA eligibility, the Certificate of Eligibility, and the VA appraisal add a few program specific steps.
A typical VA home buying process may look like this:
Confirm Your VA Home Loan Eligibility
Start by determining whether you meet the applicable VA service requirements for the home loan benefit. Eligibility can depend on when and how you served or whether you qualify as an eligible surviving spouse.
Obtain Your Certificate of Eligibility
A Certificate of Eligibility, or COE, confirms to a lender that you meet the basic service requirements for the VA home loan benefit. Buyers can request a COE through VA, and lenders may also be able to obtain it.
Apply With a VA Lender
VA backs qualifying loans, but private lenders provide the financing. Your lender reviews factors such as income, debts, credit, and other financial information to determine whether you qualify.
Determine Your Home Buying Budget
Loan preapproval can help you understand the purchase price and estimated monthly payment that may fit your financial situation before you begin seriously comparing homes.
Find an Eligible Home
VA financing can be used for eligible resale homes and new construction. The property and transaction must meet applicable VA and lender requirements.
Complete the VA Appraisal
A VA approved appraiser provides an opinion of the property's value and evaluates the home for applicable VA Minimum Property Requirements. The appraisal is not the same as a home inspection.
Complete Underwriting
Your lender reviews the loan file, financial documentation, appraisal, and other required information before making a final lending decision.
Close on Your Home
Once the loan and transaction are ready to close, you review and sign the required documents and complete the purchase according to the closing instructions.
Does the VA Give You the Mortgage?
For a typical VA backed purchase loan, no. The mortgage is provided by a private lender, such as a bank, mortgage company, or credit union.
The Department of Veterans Affairs guarantees a portion of an eligible loan. That guaranty can help lenders offer qualifying borrowers VA loan benefits that may include no down payment and no private mortgage insurance requirement.
VA eligibility is not the same as mortgage approval
A Certificate of Eligibility establishes that you meet basic eligibility requirements for the VA home loan benefit. It does not mean a mortgage has automatically been approved.
The participating lender still evaluates your financial qualifications and makes the lending decision.
How Does a VA Loan Work With No Down Payment?
Eligible VA borrowers may be able to purchase a home without making a down payment when the home's sales price is not higher than its appraised value.
According to the Department of Veterans Affairs, nearly 90% of VA backed home loans are made with no down payment.
Zero down does not necessarily mean zero dollars are needed to purchase the home. Buyers can still have closing costs, prepaid expenses, and a VA funding fee when applicable.
Does a VA Loan Have PMI?
No. VA backed purchase loans do not require private mortgage insurance or mortgage insurance premiums.
This can be an important distinction when comparing VA financing with other mortgage programs that may require mortgage insurance with a smaller down payment.
What Does the VA Appraisal Do?
A VA appraisal is part of the VA backed purchase loan process. The appraiser provides an opinion of the property's value and evaluates the property for applicable VA Minimum Property Requirements.
The appraisal is not a substitute for a home inspection. An inspection is a separate, more detailed evaluation of the home's condition that a buyer may choose to obtain.
Can You Use a VA Loan to Buy a New Construction Home?
Yes, potentially. VA backed financing can be used to build a home, and VA financing may also be used to purchase an eligible newly built home.
A VA buyer may consider a completed new home, a home already under construction, or another eligible new construction opportunity depending on financing, timing, and availability.
Does a Seller Have to Accept a VA Loan?
With a resale home, the individual seller generally decides which purchase offer to accept, counter, or decline, subject to applicable law.
That means a VA buyer shopping the resale market may encounter sellers who choose another offer for any number of lawful reasons.
Allen Edwin Homes takes a different approach: we accept VA financing on eligible new home purchases.
For VA buyers, that provides clarity from the beginning. You can explore eligible Allen Edwin homes knowing that VA financing itself is welcome.
How Much Experience Does Allen Edwin Homes Have With VA Buyers?
Since Allen Edwin Homes began tracking VA financed transactions in 2017, 667 homes have closed using VA financing.
Allen Edwin Homes builds new homes throughout Michigan, Indiana, and Ohio and accepts VA financing on eligible purchases.
VA Home Buying FAQs
Frequently Asked Questions About How VA Loans Work
How does a VA loan work?
A private lender provides a qualifying VA backed mortgage, while the Department of Veterans Affairs guarantees a portion of the loan. The buyer must meet VA eligibility requirements, qualify with the lender, and purchase an eligible property.
Does the VA lend you the money to buy a house?
For a typical VA backed purchase loan, a private lender provides the mortgage. VA guarantees a portion of the qualifying loan rather than directly providing the purchase mortgage.
Do you need a down payment with a VA loan?
Not always. Eligible borrowers may be able to purchase with no down payment when the home's sales price is not higher than its appraised value. VA and lender requirements apply.
Do VA loans require PMI?
No. VA backed purchase loans do not require private mortgage insurance or mortgage insurance premiums.
Does a VA loan require an appraisal?
Yes. A VA appraisal is part of the VA backed purchase loan process. The appraisal provides an opinion of value and evaluates the property for applicable VA Minimum Property Requirements.
Can you buy a new construction home with a VA loan?
Yes, potentially. VA financing may be used for eligible new construction purchases when the borrower, property, appraisal, lender, and loan meet applicable requirements.
Does Allen Edwin Homes accept VA financing?
Yes. Allen Edwin Homes accepts VA financing on eligible new home purchases in Michigan, Indiana, and Ohio.
Take the Next Step Toward a New Home
If you are considering VA financing, understanding your eligibility and loan options is a smart first step. When you're ready to look at homes, explore Allen Edwin's available new homes throughout Michigan, Indiana, and Ohio.
