VA home loans provide valuable benefits for veterans, active-duty service members, and eligible surviving spouses. Backed by the U.S. Department of Veterans Affairs, these loans offer advantages that can make homeownership more accessible and affordable than conventional financing options.
Key Benefits of VA Loans
The VA guarantee reduces lender risk, allowing more favorable terms than conventional mortgages. Understanding these benefits helps you evaluate whether a VA loan is your best financing option.
No down payment required. VA loans allow eligible borrowers to finance 100% of a home's purchase price without a down payment. This eliminates one of the largest barriers to homeownership and allows you to preserve savings for moving costs, furniture, or emergency funds.
No private mortgage insurance. Conventional loans require PMI when your down payment is less than 20%, typically adding $50 to $200 monthly to your payment. VA loans eliminate this requirement regardless of down payment size, providing significant monthly savings.
Competitive interest rates. VA loans typically offer lower interest rates than conventional mortgages. The VA guarantee makes these loans less risky for lenders, savings they pass to borrowers through reduced rates. Even modest rate differences save thousands over the loan term.
Flexible qualification standards. While the VA doesn't set minimum credit score requirements, most lenders prefer scores of 620 or higher. However, the VA's backing allows lenders to approve borrowers with credit challenges that might disqualify them for conventional loans. Debt-to-income ratio requirements are also more flexible than conventional standards.
Limits on closing costs. The VA restricts which closing costs lenders can charge borrowers. Sellers can also pay some or all of your closing costs, reducing your out-of-pocket expenses at closing.
Assumable loans. VA loans can be assumed by qualified buyers when you sell your home. In rising rate environments, assumable loans with lower interest rates can make your property more attractive to buyers.
Eligibility Requirements
VA loans serve those who have served their country. Specific eligibility depends on your service type and duration.
Veterans qualify if they meet minimum service requirements. For those who served during wartime, this typically means 90 consecutive days of active service. For peacetime service, the requirement is generally 181 days of continuous active duty.
Active-duty service members become eligible after serving 90 continuous days.
National Guard and Reserve members qualify after six years of service, though members activated for at least 90 days under Title 10 orders may qualify sooner.
Surviving spouses of service members who died in service or from service-connected disabilities may be eligible. Specific restrictions apply, including requirements that the spouse hasn't remarried or meets certain remarriage criteria.
Certificate of Eligibility required. You'll need a COE proving you meet eligibility requirements. Obtain this through the VA's eBenefits portal, by mail using VA Form 26-1880, or through your lender who can request it on your behalf.
Types of VA Loans
VA financing offers several loan types for different purposes:
VA purchase loans finance the purchase of a primary residence. You can use these to buy single-family homes, condominiums in VA-approved projects, manufactured homes, or multi-unit properties (up to four units) where you'll occupy one unit.
VA cash-out refinance loans replace your existing mortgage (VA or conventional) with a new VA loan for more than you currently owe. You receive the difference in cash, which you can use for home improvements, debt consolidation, or other purposes.
Interest Rate Reduction Refinance Loans (IRRRL) allow you to refinance an existing VA loan to a lower interest rate or from an adjustable-rate to fixed-rate mortgage. These streamlined refinances require minimal documentation and no new appraisal in most cases.
VA jumbo loans exceed standard VA loan limits but still don't require down payments for qualified borrowers. These help veterans purchase higher-priced homes in expensive markets.
Understanding VA Loan Limits
The VA doesn't technically cap how much you can borrow, but it does limit how much it will guarantee without a down payment. For most borrowers with full entitlement in 2024, there's no limit on zero-down purchases.
If you've previously used VA loan benefits without fully restoring your entitlement, or if you're purchasing a home above certain thresholds while simultaneously maintaining another VA loan, limits may apply. Your lender can explain how limits affect your specific situation.
The VA Funding Fee
VA loans require a one-time funding fee that helps offset program costs to taxpayers. The fee varies based on several factors:
Service type. Regular military members typically pay 2.15% for first-time use with no down payment. Reserve and National Guard members pay slightly higher rates.
Down payment amount. Making a down payment of 5% reduces the funding fee to 1.5%, while 10% or more reduces it to 1.25%.
Subsequent use. Veterans using VA benefits for a second or subsequent time pay higher funding fees—typically 3.3% with no down payment.
Exemptions apply. Veterans receiving VA disability compensation, surviving spouses receiving Dependency and Indemnity Compensation, and veterans receiving or entitled to receive disability compensation are exempt from the funding fee.
Payment options. Most borrowers roll the funding fee into their loan amount rather than paying it upfront at closing. This increases your loan balance slightly but eliminates the need for additional cash at closing.
Property Requirements
VA loans can only finance properties meeting the VA's Minimum Property Requirements (MPRs). These standards ensure homes are safe, structurally sound, and sanitary.
MPR considerations include:
Adequate heating, cooling, and ventilation systems. Safe electrical and plumbing systems. Sound structural foundation and roof. No lead-based paint hazards. Safe drinking water and sewage disposal. Adequate access and egress.
The VA appraisal identifies MPR issues. Sellers typically must repair these deficiencies before closing, though buyers can sometimes accept properties "as-is" under specific circumstances.
The Application Process
Obtain your Certificate of Eligibility. Request your COE through the VA's website, by mail, or through your lender. This document proves you meet service requirements and shows your available entitlement.
Choose a VA-approved lender. Not all lenders offer VA loans. Find one experienced with VA financing who can explain specific requirements and guide you through the process.
Get pre-approved. Pre-approval involves submitting financial documentation so lenders can verify your income, assets, debts, and creditworthiness. Pre-approval letters show sellers you're a serious, qualified buyer.
Find a home and make an offer. Work with a real estate agent familiar with VA loans. They understand VA appraisal requirements and can help negotiate effectively.
Complete the appraisal. The lender orders a VA appraisal to confirm the home's value and ensure it meets MPRs. The appraisal protects both you and the VA by preventing overpayment and ensuring property condition.
Final underwriting and closing. The lender completes final underwriting, verifying all information and ensuring you still qualify. Once cleared to close, you'll sign loan documents and receive your keys.
Advantages Over Other Loan Types
Compared to conventional loans. VA loans don't require down payments or PMI, offer more flexible credit requirements, and typically provide lower interest rates. Closing cost restrictions also benefit borrowers.
Compared to FHA loans. While FHA loans also accept low down payments and flexible credit, they require both upfront and annual mortgage insurance premiums. FHA's upfront premium is 1.75% of the loan amount, and annual premiums remain for the loan's life if you put down less than 10%. VA loans eliminate ongoing mortgage insurance entirely for most borrowers.
Compared to USDA loans. USDA loans offer zero-down rural home financing but have income limits and geographic restrictions. VA loans have no income caps and work in urban and rural areas alike.
Common Questions About VA Loans
Can I use a VA loan multiple times? Yes. As long as you have available entitlement, you can use VA loan benefits multiple times. When you sell a home and pay off the VA loan, your entitlement typically restores fully for future use.
Can I rent out a property purchased with a VA loan? You must occupy the home as your primary residence, typically for at least one year. After meeting occupancy requirements, you can rent the property while keeping the VA loan in place.
Can I use a VA loan to buy an investment property? No. VA loans require you to occupy the property as your primary residence. However, you can purchase multi-unit properties (up to four units) and rent the units you don't occupy.
What if the appraisal comes in low? If the appraised value is less than your offer price, you have several options: negotiate a lower price with the seller, pay the difference in cash, or cancel the contract (if your offer included an appraisal contingency).
Do VA loans take longer to close? VA loans typically close in 30 to 45 days, similar to conventional loans. Working with experienced VA lenders and being responsive with documentation helps ensure smooth, timely closings.
Maximizing Your VA Loan Benefits
Shop for competitive rates. VA backing doesn't mean all lenders offer identical terms. Compare rates, fees, and service from multiple VA-approved lenders.
Consider the funding fee. While rolling the funding fee into your loan eliminates upfront costs, paying it at closing (if you can afford to) reduces your loan balance and monthly payment.
Understand your entitlement. If you've used VA benefits previously, verify how much entitlement you have available. This determines your borrowing capacity without a down payment.
Review your credit. While VA loans accommodate imperfect credit, better scores still secure better rates. If time allows, improve your credit before applying.
Save for closing costs. Even though VA loans limit closing costs and allow sellers to contribute, having savings available for closing expenses, moving costs, and immediate home needs provides financial security.
Ready to Use Your VA Home Loan Benefits?
VA loans represent one of the most valuable benefits available to veterans and service members. If you're eligible, these loans provide unmatched advantages for purchasing or refinancing your home. Our team specializes in VA loans and understands the unique requirements and benefits these mortgages offer. We'll guide you through the entire process, from obtaining your Certificate of Eligibility to closing on your home. Contact us today to explore your VA loan options and take the first step toward homeownership with the benefits you've earned through your service.