A VA loan is a mortgage backed by the U.S. Department of Veterans Affairs that lets eligible service members, veterans, and surviving spouses buy a home with no down payment and no private mortgage insurance. The VA doesn’t lend the money directly. Instead, it guarantees a portion of the loan, which reduces risk for private lenders and allows them to offer significantly better terms than conventional mortgages.
Who Can Get a VA Loan
Eligibility is tied to your military service. Active-duty service members, veterans, and members of the National Guard and Reserves can all qualify, though the specific service requirements differ. National Guard members need at least 90 days of active service, including at least 30 consecutive days under certain Title 32 orders. Veterans generally need to meet minimum active-duty service thresholds that vary depending on when they served.
Surviving spouses of service members who died in the line of duty or from a service-connected disability may also be eligible. To prove your eligibility, you’ll need a Certificate of Eligibility (COE), which your lender can often pull electronically through the VA’s system in seconds. You can also request one yourself through the VA’s eBenefits portal.
The VA Guaranty and Why It Matters
The VA doesn’t write you a check or fund your mortgage. What it does is guarantee your lender that if you default, the VA will cover up to 25% of the loan amount. That guarantee is what makes the loan’s signature benefits possible: lenders don’t need you to put money down or carry private mortgage insurance (PMI), because the VA’s backing reduces their exposure.
Your share of that guarantee is called your “entitlement.” If you have full entitlement, meaning you’ve never used a VA loan before or you’ve fully restored your entitlement from a previous loan, there is no cap on the loan amount the VA will back. You can borrow as much as a lender will approve you for with zero down payment.
If you’ve already used part of your entitlement on another VA loan and haven’t restored it, your remaining entitlement is calculated based on the conforming loan limit in the county where you’re buying. The formula: take 25% of the county loan limit, then subtract the entitlement you’ve already used. If the remaining entitlement doesn’t cover 25% of your new loan, your lender will likely require a down payment to make up the difference.
No Down Payment and No PMI
On a conventional loan, putting less than 20% down triggers private mortgage insurance, which can add $100 to $300 or more per month depending on the loan size. VA loans eliminate that cost entirely. Combined with the zero-down-payment option, this means you can buy a home while keeping significantly more cash in your pocket. For a $350,000 home, skipping a 20% down payment saves you $70,000 upfront, and avoiding PMI saves you thousands over the life of the loan.
The VA Funding Fee
Instead of mortgage insurance, VA loans carry a one-time funding fee that helps sustain the program for future borrowers. The fee is a percentage of your loan amount, and it varies based on your down payment and whether you’ve used a VA loan before.
- First-time use, less than 5% down: 2.15% of the loan amount
- Subsequent use, less than 5% down: 3.3%
- 5% or more down (any use): 1.5%
- 10% or more down (any use): 1.25%
On a $300,000 loan with no down payment and first-time use, that works out to $6,450. Most borrowers roll the funding fee into the loan rather than paying it at closing, which means it adds to your monthly payment but doesn’t require cash upfront. Veterans receiving VA disability compensation and surviving spouses are exempt from the funding fee entirely.
Interest Rates and Loan Terms
VA loans consistently carry lower interest rates than conventional and FHA loans. Because the government guarantee reduces lender risk, you’ll typically see rates that are 0.25% to 0.5% lower than what you’d get on a comparable conventional mortgage. Over 30 years on a $300,000 loan, even a quarter-point rate difference saves roughly $15,000 in interest.
You can choose a 15-year or 30-year fixed-rate loan, or an adjustable-rate mortgage. The VA also allows refinancing through two programs: the Interest Rate Reduction Refinance Loan (IRRRL), which streamlines the process for lowering your rate on an existing VA loan, and the cash-out refinance, which lets you tap your home equity.
How the Appraisal and Property Standards Work
Every VA purchase loan requires a VA appraisal, which serves two purposes: determining the home’s market value and confirming it meets the VA’s Minimum Property Requirements (MPRs). These standards exist to protect you from buying a home with serious safety or livability problems. The appraiser isn’t doing a full home inspection, but they are checking for specific conditions.
The home must have adequate living, sleeping, cooking, and sanitary spaces. Mechanical systems like HVAC and plumbing need to be safe to operate and have reasonable remaining useful life. The roof must prevent moisture from entering the home. Every unit needs electricity, domestic hot water, and a continuing supply of safe drinking water. If there’s a crawl space, it must be accessible, clear of debris, and properly vented. Homes that rely on a wood-burning stove as the primary heat source must also have a conventional heating system capable of maintaining at least 50 degrees Fahrenheit in areas with plumbing.
If the appraisal reveals issues, the seller typically needs to make repairs before the loan can close. This can slow down the process, which is one reason some sellers in competitive markets prefer conventional offers. However, many homes pass the appraisal without issue, and the standards are designed around basic safety rather than cosmetic perfection.
The Buying Process Step by Step
The VA loan process follows the same general flow as any mortgage, with a few extra steps. First, obtain your Certificate of Eligibility. Your lender can usually retrieve this electronically, so you don’t need to have it in hand before starting.
Next, get preapproved by a VA-approved lender. Not every mortgage company handles VA loans, but most large lenders and many credit unions do. Shopping multiple lenders is worth your time, because rates, fees, and closing costs can vary significantly even on the same loan type.
Once you find a home and go under contract, your lender orders the VA appraisal. A VA-assigned appraiser inspects the property and provides both a value estimate and an assessment of whether it meets minimum property standards. If the appraised value comes in below your offer price, you can negotiate with the seller, make up the difference in cash, or walk away.
After the appraisal clears, the loan moves through underwriting, where the lender verifies your income, credit, employment, and debt levels. The VA doesn’t set a minimum credit score, but most lenders require at least 620. Closing typically happens 30 to 45 days after you go under contract, though appraisal delays or repair negotiations can stretch that timeline.
Occupancy Requirements
VA loans are for primary residences only. You generally have 60 days from closing to move into the home. You cannot use a VA loan to buy a vacation property or a pure investment rental.
Active-duty service members who are deployed get flexibility here. If you’re stationed away from the property, you can satisfy the requirement by demonstrating “valid intent” to occupy the home. This applies whether you’re married or single. Your spouse can also fulfill the occupancy requirement on your behalf if deployment or duty station assignments prevent you from living there within a reasonable timeframe.
What VA Loans Can Be Used For
Beyond purchasing a single-family home, VA loans can finance condos (in VA-approved complexes), manufactured homes, multi-unit properties up to four units (as long as you live in one), and new construction. You can also use a VA loan to refinance an existing mortgage, whether it’s already a VA loan or not.
One of the program’s most powerful features is that it’s reusable. Once you sell a home and pay off the VA loan, your entitlement is restored and you can use it again. Even if you have an existing VA loan, you may be able to use remaining entitlement to purchase a second home, though down payment requirements may apply depending on how much entitlement you’ve already committed.
Closing Costs and Seller Concessions
VA loans have closing costs like any mortgage, including lender origination fees, title insurance, recording fees, and prepaid taxes and insurance. However, the VA limits certain fees that lenders can charge, and sellers are allowed to contribute up to 4% of the home’s sale price toward your closing costs. That 4% cap covers things like prepaid taxes, the funding fee, and other buyer expenses, which can significantly reduce the cash you need at closing.
Between the zero down payment, the option to roll the funding fee into the loan, and seller concessions, it’s possible to close on a VA loan with very little money out of pocket. That said, having some reserves for moving costs, minor repairs, and the first few months of homeownership is always a practical idea.