What are VA loan eligibility requirements and the best lenders?

VA loans — mortgages backed by the U.S. Department of Veterans Affairs — can be a strategic way for military service members and veterans to purchase a home affordably. 

For starters, the average rates for VA loans are significantly lower than conventional mortgages. Plus, you can put as little as 0% down and you won't have to pay for mortgage insurance, which is typically required for people who buy a home with less than 20% equity. Instead, you'll pay a one-time VA funding fee that ranges from 0.5% to 3.3% of the loan amount based on the size of your down payment and the number of times you've used a VA loan before.

But, while VA loans are more affordable than conventional mortgages, they are restricted to certain applicants and home types. Here's what you need to apply. 

Financial requirements

Here are the typical baseline financial requirements you'll need to take out a VA loan: 

• A credit score of 620 or higher 
• A 41% debt-to-income ratio 
• Proof of a steady income

Military service requirements

In addition to a strong financial background, applicants must submit a certificate of eligibility which can be obtained from the Department of Veterans Affairs. You also need to meet the minimum service requirements to apply: 

• Active duty service members: who have served for 90 consecutive active service days in wartime or 181 consecutive active service days in peacetime
• Veterans: who have served 24 months of continuous active duty (in most cases).
• For National Guard members: who have served six years in the Selected Reserve or served with 90 days of active service (with 30 being consecutive). 
• Spouses: typically, the spouse of a member of the military who died while serving or who died from an illness or disability acquired because of their service.

Residency requirements

To be eligible for a VA loan, you must show that the home will be your primary residence.

Though you're required to move into the home as your primary residence within 60 days of closing on the house, you can submit a request to move in later if you're deployed or stationed elsewhere but plan to move to the house soon. 

If you meet these requirements, CNBC Select picked the best VA loans based on low rates and outstanding customer support. 

If you're looking for the lowest rate possible, consider Navy Federal Credit Union. It offers rates that are consistently below average. 

Plus, we love that NFCU will allow you to lower your rate for a $250 fee without refinancing. So if the rate market goes down, you can cash in. 

 If you are keen on getting the best service possible, look at Veterans United. It regularly won the highest rating possible on J.D. Power's customer satisfaction surveys.

Plus, Veterans United works within local communities to support charities that help veterans and their families. 

Why trust CNBC Select?

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed financial decisions. Every mortgage review is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of home loan products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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