How to Get a No Down Payment VA Loan

By Jerry Anderson

Private lending institutions make Department of Veterans Affairs (VA) loans to service members, veterans, reservists and surviving spouses to buy or refinance homes. However, the VA guarantees a portion of the loan, helping to protect the lender in case the borrower defaults on the mortgage. The VA indicated on April 7, 2010 that loans are normally limited to $417,000. However, homes in high-cost counties can have higher limits. The loan has many benefits, such as no mortgage insurance cost. Generally, a borrower can obtain a mortgage that requires no down payment. However, the loan must not be greater than four times the entitlement amount that can be up to 25 percent of the VA loan limit in the applicable county.

Visit the VA website to review eligibility requirements (see References). The VA reported on Aug. 4, 2010 that certain rules apply differently for an enlisted serviceperson than for an officer. For example, you must meet certain requirements if you enlisted and your period of service occurred after Sept. 7, 1980. However, officers who served after Oct. 16, 1981 must meet these requirements.

Meet with a housing counselor to learn the purchasing process and the key players, such as an escrow company. Call the Department of Housing and Urban Development (HUD) at 800-569-4287 to locate a counseling office. Typically, there is no charge. However, the VA does not require counseling.

Visit the VA website to apply for a Certificate of Eligibility. You can register to apply online or mail a completed form that you can obtain online. (see Resources). However, you may elect to have the lender obtain the certificate at the time you apply for a loan.

Work with a real estate agent to select a home. However, you may work directly with the seller if an agent is not participating.

Retain a lender making VA loans requiring no down payments. Provide your Certificate of Eligibility, if available. However, you must meet the lender's requirements for a no down payment loan.

Complete the loan application. Next, a VA-approved appraiser issues a Certificate of Reasonable Value.

Wait until the lender informs you of the loan decision. If your application and the home value are acceptable, you should be approved.

Attend the loan closing after the loan approval. Typically, the closing occurs at a title company, where a representative explains the mortgage and you sign required documents.

You may pay for the appraisal and credit report if the seller does not.

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