What Are the Basic VA Loan Requirements?

A VA-backed purchase loan combines two separate approvals: eligibility for the VA home loan benefit and financial approval from a VA-approved lender. A Certificate of Eligibility confirms your benefit eligibility, but it does not guarantee loan approval.

1. Obtain a Certificate of Eligibility

Your Certificate of Eligibility (COE) tells the lender that your military service, duty status or qualifying surviving-spouse status meets VA eligibility rules. Service requirements vary according to when and how you served. Many current service members meet the minimum service requirement after 90 continuous days of active duty, while rules for Veterans, National Guard members, Reservists and surviving spouses can differ.

You can request a COE through VA.gov, through a lender, or by submitting VA Form 26-1880. An experienced VA lender can often retrieve it electronically.

2. Meet the lender’s credit and income standards

The VA does not set a universal minimum credit score, but individual lenders may establish their own credit-score requirements. Lenders also review payment history, stable and reliable income, monthly debts, assets and the funds needed to close.

VA underwriting gives special attention to residual income—the money remaining after the proposed housing expense, debts, taxes and other obligations are paid. Debt-to-income ratio matters, but it is only one part of the complete underwriting decision.

3. Use the home as your primary residence

A VA purchase loan is intended for a home you will occupy as your primary residence. It is not designed to purchase a vacation home or a property held strictly as an investment. Eligible properties can include a single-family home, a qualifying condominium, certain manufactured homes, and a two-to-four-unit property when the VA borrower will occupy one unit.

4. Have enough entitlement for the transaction

Your COE shows your available entitlement. Borrowers with full entitlement are not subject to a VA-imposed loan limit, but that does not create unlimited borrowing power. The lender must still approve the loan based on your finances, its lending standards, and the lower of the purchase price or appraised value. If part of your entitlement is already in use, county loan limits can affect the guaranty calculation and whether a down payment is needed.

How Does the VA Funding Fee Work?

The VA funding fee is a one-time charge that helps support the VA home loan program. It is not monthly mortgage insurance. The fee is generally calculated as a percentage of the loan amount—not the purchase price—and may be paid in full at closing or financed into the loan.

Current VA purchase funding fee rates

The following VA-published rates apply to purchase and construction loans and were current when this article was updated:

Rates are subject to federal change. Confirm the current rate and your exemption status with your lender before closing.

Who may be exempt from the funding fee?

You may be exempt if you meet a VA-recognized condition, including if you:

• Receive VA compensation for a service-connected disability;
• Are eligible for disability compensation but receive retirement or active-duty pay instead;
• Receive Dependency and Indemnity Compensation as a qualifying surviving spouse;
• Are a service member with a qualifying proposed or memorandum rating for a pre-discharge claim before closing; or
• Are serving on active duty and provide evidence before closing that you received the Purple Heart.

Your lender should verify the funding-fee status shown through the VA system. If a later disability award has an effective date before your closing, you may qualify for a refund under VA rules.

Funding fee example

For a first-use borrower purchasing with a $350,000 loan and less than 5% down, a 2.15% funding fee would equal $7,525. If financed, the starting loan balance would generally increase by that amount. Financing the fee reduces the cash needed at closing, but you will pay interest on the higher loan balance.

What Does a VA Appraisal Check?

The lender orders the VA appraisal after the home is under contract. The appraiser provides an opinion of market value and reviews the property for applicable VA Minimum Property Requirements, often called MPRs. The result is used to issue the Notice of Value.

At a high level, VA property standards are intended to address whether the home is safe, structurally sound and sanitary. Depending on the home, the appraiser may identify concerns involving:

• Safe access to the property and living areas;
• Adequate living, sleeping, cooking and sanitary facilities;
• Roof condition and protection from the elements;
• Working mechanical, electrical, plumbing, heating and water systems;
• Health or safety hazards, defective paint or significant wood-destroying insect damage;
• Private water, septic, drainage or other site conditions when applicable; and
• Local VA requirements that apply to the property’s location.

An appraisal can be made subject to repairs. The parties then work through the contract, lender and VA requirements to determine who will complete those repairs and whether the transaction can proceed.

What happens if the appraised value is low?

If the appraiser believes the contract price may not be supported, the Tidewater Initiative can provide an opportunity for the designated point of contact to submit relevant comparable-sales data before the final value is issued.

If the final Notice of Value is still below the purchase price, the borrower may be able to:

• Request a Reconsideration of Value through the lender when additional market evidence supports it;
• Renegotiate the purchase price;
• Pay the difference between the appraised value and contract price; or
• Use the VA Escape Clause, when applicable, to terminate based on the low VA value without forfeiting earnest money.

VA Appraisal vs. Home Inspection

A VA appraisal is not a substitute for a professional home inspection. The appraiser is evaluating market value and visible compliance with VA property requirements. A home inspector performs a broader evaluation of the home’s systems and components for the buyer.

The VA does not require a home inspection, but it strongly recommends one. An inspection may reveal roof wear, drainage problems, electrical defects, plumbing leaks, HVAC concerns, foundation movement, moisture intrusion and other conditions that may not be addressed in an appraisal.

As a former Texas Professional Inspector with approximately 4,000 inspections, Keith helps clients understand why both steps matter: the appraisal protects the loan program’s collateral requirements, while the inspection gives the buyer much deeper information for decision-making and negotiations.

VA Loan Closing Costs and Seller Contributions

“Zero down” does not always mean “zero cash to close.” A buyer may still have expenses such as the appraisal, title-related charges, prepaid property taxes and insurance, discount points, lender fees and other transaction costs.

VA rules allow the buyer and seller to negotiate payment of many closing costs. VA distinguishes ordinary closing-cost credits from seller concessions. The VA does not set a percentage limit on credits applied to allowable loan closing costs, but seller concessions are generally limited to 4% of the home’s reasonable value. Concessions can include items such as payment of the VA funding fee, payoff of certain buyer debts, or prepayment of hazard insurance.

On a purchase loan, the funding fee may be financed. Other closing costs generally cannot simply be rolled into the VA purchase loan, so your agent and lender should help create a clear cash-to-close estimate early in the process.

VA Homebuying Process: Step by Step

1. Confirm eligibility and obtain the COE. Review available entitlement and funding-fee status.
2. Choose an experienced VA lender. Compare rates, fees, service and lender-specific standards.
3. Complete a full pre-approval. Provide income, asset, debt and credit documentation.
4. Set a realistic budget. Include taxes, insurance, possible HOA dues, maintenance and moving costs—not just principal and interest.
5. Shop with a VA-experienced real estate professional. Evaluate property condition, likely appraisal issues and contract strategy.
6. Write a well-structured offer. Include the required VA provisions and appropriate protections.
7. Complete inspections and due diligence. Review findings and negotiate according to the contract.
8. Complete the VA appraisal and underwriting. Address any required repairs or lender conditions.
9. Review final numbers and close. Compare the Closing Disclosure with earlier estimates and ask questions before signing.

Frequently Asked Questions About VA Loans