Best VA Mortgage Lenders of March 2023

If you're an eligible service member or veteran, consider applying for a VA mortgage when you're ready to buy or refinance your home. VA home loans are issued by private lenders but guaranteed by the U.S. Department of Veterans Affairs (VA). As a result, qualifying requirements for VA loans are less stringent than for standard loans. Interest rates are also competitive (although there are some loan fees to pay).

A wide variety of lenders make these loans, but the best VA loan lenders offer loans with no down payment requirements, no private mortgage insurance, and relaxed credit score standards. Here are our experts' favorites.

VA loans are issued by private lenders that rely on a guarantee made by Veterans Affairs that protects them in case of default.

The VA guarantees a number of loan types including:

Purchase loans

These help you buy a new home with a mortgage guaranteed by the VA, as of 2020, there is no loan limit if you have full entitlement.

Cash-out refinance loans

These enable you to refinance an existing mortgage, borrowing more than you currently owe to access equity in your house and turn it into cash.

Interest rate reduction refinance loans

These can help reduce your monthly payments and the total cost of your mortgage by refinancing to a new one at a lower interest rate.

In addition to guaranteeing loans made by banks, credit unions, and online lenders, the VA also offers more direct assistance to eligible service members. Direct sources of home-buying help include adapted housing grants for veterans to buy, build, or adapt a home to account for a service-connected disability.

There's also a Native American Direct Loan program that helps eligible Native American veterans buy, build, or improve homes on Federal Trust land.

VA loans often have lower interest rates and easier qualifying requirements than conventional mortgages not guaranteed by the VA. Eligible service members and their families can qualify for a loan with no down payment, and they don't have to pay private mortgage insurance (PMI). PMI is required on some other types of loans with a down payment below 20%.

However, the VA does charge a one-time VA funding fee, which varies depending on your service record, whether you've gotten a VA loan before, and the size of your down payment. The funding fee is between 1.4% and 3.6% of the amount you're borrowing. However, veterans receiving disability compensation are exempt from this fee.

It's important to consider the funding fee as well as the interest rate when comparing VA loans to other loan options.

While there are many advantages to VA loans, they also come with some drawbacks.

Here are a few pros and cons to consider:

Veterans who meet length-of-service requirements, active duty service members, certain current or former National Guard or Reserve members, and surviving spouses of veterans who passed away on active duty may all be eligible for a VA loan. You can check www.ebenefits.va.gov or call 877-827-3702 to determine if you meet the service history requirements.

In addition to your service record, additional requirements include:

• You must use the loan to purchase a home you will occupy or that your spouse or dependents will occupy while you are on active duty.
• You must have satisfactory credit. However, there is no minimum credit score limit and lenders are expected to look at your entire financial profile when deciding whether to lend to you.
• You must have enough income to make monthly mortgage payments and meet your other financial obligations. You can use our mortgage calculator to estimate what your monthly payments might look like.
• You must obtain a valid Certificate of Eligibility from the VA.
• Your debt-to-income ratio must be below 41% unless the lender provides compensating factors (other financial criteria that justifies your approval).

To apply for a VA loan, you'll need to take the following steps:

• Assemble your documents. You will need to prove your military affiliation. This could mean providing your discharge or separation papers (DD214) if you are a veteran, or a statement of service if you are an active duty military member.
• Obtain a Certificate of Eligibility. You can apply for this online at your eBenefits account or via mail. The U.S. Department of Veterans Affairs provides details on obtaining the COE.
• Determine what type of VA loan you want. The process of applying will differ if you are interested in a direct loan or want to get a loan from a private lender that is guaranteed by the VA.
• Research lenders. Different private lenders have their own rules for eligibility, as well as their own interest rates. You should compare quotes from several lenders to find the right one.
• Submit an application to your lender. You'll need to apply for a loan either online or in person, based on your lender's requirements. This will involve providing your Certificate of Eligibility as well as basic financial and personal information such as proof of income and your credit details.

You will also have to complete the other essential steps in the mortgage application process, including having the home you are interested in buying appraised to determine its value.

Many banks, online lenders, and credit unions offer VA loans. To find the right lender:

• Look for several lenders that offer loans guaranteed by the VA.
• Get pre-approval or prequalification from each lender to find out the rates and terms of the loan they would provide. Ideally, look for lenders that pre-approve you without a hard credit inquiry. That will help to protect your credit score.
• Choose a loan with the lowest total cost. Make sure you factor in the interest paid over time as well as the upfront fees and application fees. While the VA funding fee is always the same, other costs can vary considerably from one lender to another.

It is best to get quotes from several mortgage lenders as each can set their own terms and interest rates as long as they conform to broad VA guidelines for issuing loans.

A VA loan is a good option if:

• You have a service record that entitles you to a loan.
• You don't have the credit score or financial credentials required to get a loan from a conventional lender that has lower fees and a comparable interest rate.
• You don't have a down payment or your down payment is small and you don't want to have to pay for PMI. Or you've received a down payment gift and you would like to use it for 100% of your down payment. (Not all loan types allow this.)

Related: If a VA loan isn't right for you, check out The Ascent's research piece on some of the largest mortgage providers.