Did you know that the VA doesn’t actually loan money to veterans? Here’s how the VA loan actually works.


The VA doesn’t loan money to veterans.

No, we’re not reporting a recent change in the VA’s policy, but we are trying to create a more informed understanding of how VA loans actually work.

Here’s what you need to know.

The United States Department of Veteran Affairs (VA) sets its own basic guidelines, and the bank loans the money to the veterans. Here’s why that’s important: The VA provides the initial guidelines to the banks, but the banks can then add more guidelines on top of those, and they don’t have to loan money based on the VA’s guidelines.

“The VA sets its own basic guidelines, and then the bank loans the money to the veterans.”

For example, the VA doesn’t have a credit score limit for applicants. However, if the lender is uncomfortable approving a loan to someone with a low credit score, it’s well within their ability to create a limit. This can lead to multiple lenders having different limits and terms, and it’s not just with credit scores.

Here’s why that’s important to you:

If you apply for a VA loan to purchase a home but are denied, it may not because of a VA rule at all. The best way to find out is to call a mortgage broker, another bank, or another relevant entity to see if the issue is due to a VA rule or if it’s what we in the mortgage business call an overlay—a rule created by the bank to overlay a normal VA rule.

This is an important distinction because the VA, in general, is fairly relaxed in a lot of areas, and we need to make sure that we get our veterans into houses if we can. Let’s help those who have helped and served us and our country so well.

If you have any questions, feel free to reach out to me. I’d love to help out.