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The Best VA Mortgages of 2021
Last year, the Department of Veterans Affairs backed an impressive 624,000 loans for active-duty soldiers, veterans, reservists, National Guardsmen and their families. If you’re eligible for the VA mortgage loan program, you can take advantage of the best VA loans to secure a home loan with no down payment and no private mortgage insurance.
Finding the best VA loan lender can make this service benefit that much easier to take advantage of, so you’ll need to do your homework and research lenders before locking in a rate. Start with the lenders outlined below, each of whom offers different perks to borrowers who qualify.
Impact of COVID in VA loans
Because of the economic effects of COVID-19, mortgage rates across all lending products have plummeted to historic lows. While this does create a more favorable time to buy, some lenders have tightened the parameters for lending requirements. The reason for this is economic turmoil like high unemployment rates make the market riskier for lenders. What this means for you is that some lenders might require you to have a higher credit score and a better financial profile than normal to gain approval.
The best VA loans of 2021
- Best Bank for VA Loans: USAA
- Best Credit Union for VA Loans: Navy Federal Credit Union
- Best Customer Satisfaction: Veterans United
- Best Application Process: Rocket Mortgage
- Best for Bad Credit: New American Funding
- Best for Lender Credit: PenFed
The best VA loans at a glance
|Lender||APR||Loan Term||Min. Credit Score||Min. Down Payment||SimpleScore|
|USAA||3.59% APR||360 months||620||3%||3.8/5|
|Navy Federal Credit Union||2.34% APR||360 months||Not Specified||0%||3.4/5|
|Veterans United||3.03% APR||360 months||660||0%||3.8/5|
|Rocket Mortgage||3.57% APR||360 months||620||3%||3.4/5|
|New American Funding||3.18% APR||360 months||500||3%||4/5|
What is a VA loan?
A VA loan is a mortgage loan backed by the Department of Veteran’s Affairs (VA). But, while these loans are backed by the VA, you still apply and receive the mortgage loan through a private lender. The perks to the VA backing these loans are that the backing lowers risk to the private lender, so you can get a VA loan with less than perfect credit, no down payment and no private mortgage insurance (PMI).
Who is eligible for a VA loan?
VA loans are only available for some active service members, veterans and some military service member families. The VA lays out all of the specific eligibility criteria on its website. For the most part, though, a VA loan is available to all active-duty service members, veterans who have met the service requirements, surviving spouses, as well as National Guard and reservists who have fulfilled a six-year commitment or served for at least 90 days of active duty (not including TRADOC time).
Additional requirements for a VA loan
- Certificate of Eligibility (COE) — To get a VA loan, you will need to obtain a COE.
- Applicants can apply for a COE through the eBenefits Portal.
- Veterans will need a copy of their DD-214.
- Active duty, National Guard and Reserve soldiers will need a statement of service signed by their commander, personnel officer or readiness NCO.
- Surviving spouses will need a copy of their significant other’s DD-214 and will need to fill out a request through Dependency & Indemnity Compensation (DIC) (if they are receiving benefits from the DIC). Spouses not receiving DIC will need additional paperwork outlined here.
[ More: How to Refinance into a VA Loan ]
Pros and cons of a VA loan
Looking at the VA loans pros and cons can help you and your family decide if this type of loan is ideal for you or not. While you may be eligible for a VA loan, you could be better suited for a more traditional form of mortgage funding in some cases.
- No down payment
- No private mortgage insurance
- Easier approval criteria
- VA funding fee
- Not available to dependents (except surviving spouses)
- Only available for primary residences
How to apply for a VA loan
Prepare the necessary documents.
Much like you would when applying for a conventional loan, you need to get together all of your documents to show to prospective lenders. The list includes asset documents, bank statements, proof of income, tax returns, gift letters from anyone that gave you money for a down payment and any other documents required by the lender.
Obtain your COE.
Where applying for a VA loan differs from a conventional mortgage is the need for a Certificate of Eligibility. The COE proves to the private lender you are eligible to receive a VA loan. You can apply for your COE through the eBenefits Portal.
Once you have all your paperwork ducks in a row, it’s time to shop lenders. Find the lender that has the best option available for you.
[ Read: When Veterans Should Use a VA Loan ]
Complete your application.
Once you’ve decided on a lender, fill out your application. If your lender has any questions or asks for additional documentation, get them what they need as quickly as possible.
How to choose the best VA loan for you
- Know what you’re looking to buy. If you start talking to lenders before you go house shopping (which is smart to do), you should have a good idea of what you’re looking to buy. Knowing the area, the price range and the type of house should be plenty to get the conversation started.
- Shop for more than just rates. While getting the best VA loan rates is extremely important, it’s not 100% of the equation. When you’re comparing lenders, look at more factors, including customer support, repayment terms, origination fees, default protections and the overall reputation in the industry.
- Consider conventional options. Chances are that the VA loan is going to be the best bet for you, especially if you’re concerned about the size of the down payment and private mortgage insurance. However, there will be some occasions where a traditional mortgage might be a better fit, especially if you’re planning on putting down a sizable down payment.
- Be wary of adjustable-rate mortgages (ARMs). ARM’s may look attractive with a low introductory rate. However, that rate doesn’t last forever. Once the intro period is over, the rate is subject to change once per year with the ebbs and flows of the market. This means your rate could skyrocket after the intro period, and your payments unexpectedly go through the roof.