VA loans offer one of the most powerful home financing options available to U.S. military members, veterans, and eligible surviving spouses. These government-backed mortgages come with significant advantages that set them apart from conventional loans, no down payment, no private mortgage insurance, and competitive interest rates.
For those who have served, understanding how VA loans work can mean the difference between renting indefinitely and owning a home. This guide breaks down everything from eligibility requirements to the application process, giving veterans and active-duty service members the information they need to take advantage of this benefit.
Key Takeaways
- VA loans require no down payment and no private mortgage insurance, potentially saving borrowers tens of thousands of dollars over the life of the loan.
- Eligibility for VA loans requires military service—typically 90 days during wartime, 181 days during peacetime, or six years for National Guard and Reserve members.
- A Certificate of Eligibility (COE) is required to prove VA loan qualification and can be obtained through the VA’s eBenefits portal, by mail, or through your lender.
- VA loan interest rates typically run 0.25% to 0.5% lower than conventional mortgage rates due to the government-backed guarantee.
- The VA funding fee ranges from 1.25% to 3.3% of the loan amount but can be rolled into the loan—and veterans with service-connected disabilities are exempt.
- VA loans can be used to purchase single-family homes, condos, multi-unit properties, manufactured homes, or to refinance existing mortgages.
What Is a VA Loan?
A VA loan is a mortgage option guaranteed by the U.S. Department of Veterans Affairs. Private lenders, banks, credit unions, and mortgage companies, issue these loans, but the VA backs a portion of each loan. This guarantee reduces the lender’s risk, which translates into better terms for borrowers.
VA loans were created in 1944 as part of the GI Bill to help returning World War II veterans purchase homes. Since then, the program has helped more than 25 million service members achieve homeownership.
Unlike FHA or conventional mortgages, VA loans don’t require borrowers to pay private mortgage insurance (PMI). They also don’t mandate a down payment in most cases. These two factors alone can save borrowers tens of thousands of dollars over the life of a loan.
The VA doesn’t lend money directly. Instead, it provides a guarantee to approved lenders. If a borrower defaults, the VA covers a portion of the loss. This arrangement encourages lenders to offer favorable rates and terms they wouldn’t provide otherwise.
VA loans can be used to purchase single-family homes, condos, multi-unit properties (up to four units), and even manufactured homes in some cases. They can also be used to refinance existing mortgages through VA-specific programs like the Interest Rate Reduction Refinance Loan (IRRRL).
Eligibility Requirements for VA Loans
VA loans aren’t available to everyone. The program serves specific groups who have earned this benefit through military service.
Service Requirements
Eligibility depends on when and how long someone served. Active-duty service members typically qualify after 90 consecutive days of service during wartime or 181 days during peacetime. National Guard and Reserve members generally need six years of service, though those called to active duty may qualify sooner.
Veterans who received an honorable discharge usually meet the service criteria. Those with other discharge types may still qualify depending on circumstances, the VA evaluates these cases individually.
Certificate of Eligibility
Every VA loan applicant needs a Certificate of Eligibility (COE). This document proves to lenders that the borrower qualifies for the VA loan program. Veterans can obtain a COE through the VA’s eBenefits portal, by mail, or through their lender.
The COE also shows the borrower’s entitlement amount, the portion of the loan the VA will guarantee. Full entitlement means no down payment is required on loans up to the conforming loan limit. Borrowers with reduced entitlement (from a previous VA loan still active) may need to put money down.
Surviving Spouses
Surviving spouses of veterans who died in service or from a service-connected disability may qualify for VA loans. Un-remarried spouses of service members missing in action or prisoners of war also have eligibility. Spouses who remarried after age 57 and after December 16, 2003, may retain eligibility as well.
Key Benefits of VA Loans
VA loans stand out from other mortgage products for several reasons. These benefits make homeownership more accessible and affordable for those who qualify.
No Down Payment Required
Most VA loans require zero down payment. Conventional loans typically demand 5% to 20% down, and FHA loans require at least 3.5%. For a $300,000 home, that’s $15,000 to $60,000 a borrower doesn’t need upfront with a VA loan.
No Private Mortgage Insurance
Conventional borrowers who put down less than 20% must pay PMI, which can add $100 to $300 or more per month. VA loans skip this requirement entirely. Over a 30-year mortgage, this saves borrowers thousands of dollars.
Competitive Interest Rates
Because the VA guarantees a portion of each loan, lenders face less risk. They pass these savings to borrowers through lower interest rates. VA loan rates consistently run 0.25% to 0.5% below conventional rates on average.
Limited Closing Costs
The VA restricts what fees lenders can charge VA loan borrowers. Certain costs, like attorney fees and prepayment penalties, are prohibited. This keeps closing costs lower than they’d be on conventional mortgages.
Flexible Credit Standards
VA loans don’t have a minimum credit score set by the VA itself, though most lenders require scores of 580 to 620. This flexibility helps borrowers with imperfect credit histories access homeownership.
VA Funding Fee
VA loans do require a one-time funding fee, ranging from 1.25% to 3.3% of the loan amount depending on down payment and whether it’s a first-time or subsequent use. This fee can be rolled into the loan balance. Veterans with service-connected disabilities are exempt from this fee.
How to Apply for a VA Loan
Applying for a VA loan follows a structured process. Borrowers who prepare ahead can move through each step efficiently.
Step 1: Obtain a Certificate of Eligibility
Start by getting the COE. Lenders can often pull this document electronically during the application process, or borrowers can request one through the VA directly. Having the COE ready speeds up approval.
Step 2: Get Preapproved
Preapproval shows sellers that a buyer is serious and financially qualified. Lenders review income, credit, and debt-to-income ratios during this stage. VA loans typically allow debt-to-income ratios up to 41%, though some lenders approve higher with compensating factors.
Step 3: Find a Home
Once preapproved, borrowers can shop for homes with confidence. VA loans work with most property types, but the home must meet VA minimum property requirements. These standards ensure the property is safe, structurally sound, and worth the purchase price.
Step 4: Complete the VA Appraisal
The VA requires an appraisal by a VA-assigned appraiser. This appraisal confirms the home’s value and checks that it meets VA property standards. If issues arise, sellers may need to make repairs before the loan closes.
Step 5: Close the Loan
After the appraisal clears and underwriting approves the file, borrowers proceed to closing. They’ll sign final documents, pay any remaining closing costs, and receive the keys to their new home.
VA loans typically take 30 to 45 days to close, similar to conventional mortgages. Working with a lender experienced in VA loans can help avoid delays.
