VA Purchase Loans

VA loans are designed to make homeownership more accessible — with advantages like no down payment, no monthly mortgage insurance and more flexible credit guidelines. These benefits can make it easier to qualify, especially for those who may not meet conventional loan standards. That said, you'll still need to meet some basic financial requirements to be approved for a VA loan, including:

• Proof of steady income. VA guidelines are generally more accommodating than conventional loans, but income stability is still required.
• Acceptable credit history. While you don't need perfect credit, most lenders (including Pennymac) require a minimum FICO score of 580 for many VA loan programs. This will also depend on the loan amount. As the loan amount increases, so does the credit score requirement.
• Manageable debt-to-income (DTI) ratio. Your DTI should typically be 43% or lower, meaning your monthly debts should not exceed 43% of your gross monthly income. Exceptions can be made however in consideration of your residual income (what you have left after all of your expenses are paid).

VA loans differ from conventional home purchase loans in several ways:

• No down payment required. Qualified borrowers can buy a home with no down payment, removing one of the biggest barriers to first-time homeownership.
• Backed by the U.S. Department of Veterans Affairs. VA Purchase Loans are guaranteed by the U.S. Department of Veterans Affairs and offered by independent lenders, like Pennymac. With the VA program, lenders are able to offer veterans more favorable loan terms.
• Eligibility. VA loans are exclusively available to eligible veterans, active-duty service members and surviving spouses. Borrowers will need a Certificate of Eligibility (COE) from the VA to confirm their qualification. Conventional loans are available to any qualified borrower who meets credit and income requirements.
• Flexible credit guidelines. You don't need perfect credit to qualify for a VA Purchase Loan, though requirements depend on the loan amount. You may qualify with a FICO score as low as 580 for loans under $1 million, while loans up to $2.5 million require a minimum score of 720.
• No monthly mortgage insurance. Most conventional loans require mortgage insurance if the borrower puts down less than 20%. VA loans do not have this requirement.
• More competitive interest rates. VA loans often come with lower interest rates compared to conventional loans, helping borrowers save more over the life of the loan.
• Property use. VA loans are intended for primary residences only. Conventional loans offer more flexibility and can be used for primary homes, second homes or investment properties.
• VA funding fee. Most VA loans include a one-time funding fee — typically 1.25% to 3.3% of the loan amount. This fee helps support the VA loan program and can be paid at closing or rolled into the loan.
• VA non allowables. The VA prohibits charging borrowers for certain costs, including attorney fees, broker commissions, doc prep fees and postage/courier charges.

The U.S. Department of Veterans Affairs created the VA loan program to support the unique needs of veterans and their families. For those who qualify, VA loans make homeownership more accessible by offering competitive interest rates, no required down payment and no monthly mortgage insurance. These benefits can significantly reduce upfront and ongoing costs. VA loans also have more flexible credit guidelines, making them a strong option for borrowers who may not qualify for conventional financing. Even those who do satisfy the criteria for other loan types often choose VA loans for their overall value.

Already have a VA loan? You may qualify for the VA streamlined refinance program (IRRRL), which makes it easy to lower your monthly payment if interest rates go down — often with less paperwork and no appraisal required.

A Certificate of Eligibility (COE) establishes that applicants meet the basic service requirements to obtain a VA Home Loan. Pennymac uses the COE to verify your eligibility for home loan benefits but it is not required to get started on the applications. Your loan officer will help walk you through the simple steps to verify your eligibility and obtain your COE.

If you'd like to get a head start on the process, the U.S. Department of Veterans Affairs has set up a system for veterans to obtain their Certificate of Eligibility through the eBenefits section of its website. Prospective borrowers can also request a COE by mail using VA Form 26-1880 (Request for a Certificate of Eligibility for Home Loan Benefits). More information and all the forms you need can be found on the U.S. Department of Veterans Affairs website.

VA Purchase Loans are flexible enough to accommodate different kinds of homeowners. A VA borrower can use a VA mortgage to help purchase residences ranging from townhomes to condominiums to single-family homes.

The VA funding fee is unique to VA loans. The fee is paid directly to the VA and is designed to help cover losses on the few loans that go into default. Most VA home loans require a funding fee between 1.25% and 3.3%, although many veterans are exempt from paying the fee if they are disabled. For example, if you're paying a 2.15% funding fee on a $200,000 mortgage, your total funding fee will come out to $4,300. You will usually have the option of rolling this fee into your total loan and spreading it out over the life of your loan, if you choose to do so.