Your Complete Guide to the VA Home Loan
What is a VA Loan?
The VA loan is a $0 down mortgage option available to Veterans, Service Members, and select military spouses. U.S. Department of Veterans Affairs (VA) guarantees VA loans that are issued by private lenders, such as a mortgage company or bank.
The VA Home Loan was conceived in 1944 by the United States government to help returning service members buy homes without the requirement of excellent credit or a hefty down payment. This celebrated benefit program has guaranteed more than 24 million VA loans, supporting veterans, active-duty military members, and their families to purchase or refinance a home.
Today, the VA Mortgage is more crucial than ever. In recent years, lenders nationwide have toughened their lending requirements in the wake of the housing market collapse, making the VA loan a lifeline for Veterans and active Military homebuyers, many of whom find difficulty when faced with stringent credit standards and down payment requirements.
Also, check out our resources to learn more about applying for VA loans.
Get your VA Home Loan quote in minutes:
VA Loan vs. Traditional Mortgages
Veteran and military homebuyers have access to one of the most unique and powerful loan programs ever created. See how the VA Loan compares to a traditional home mortgage:
VA Loans
0% Down
(for qualified borrowers)
VA Loans are among the last 0% down home loans available on the market today.
No PMI
Since VA Loans are government backed, banks do not require you to buy Private Mortgage Insurance.
Competitive Interest Rates
The VA guaranty gives lenders a greater degree of safety and flexibility, which typically means a more competitive rate than non-VA loans.
Easier to Qualify
Because the loan is backed by the government, banks assume less risk and have less stringent qualification standards for VA Loans, making them easier to obtain.
Conventional Loans
Up to 20% Down
Conventional loans generally require down payments that can reach up to 20% to secure a home loan, pushing them out of reach for many homebuyers.
PMI Required
Private Mortgage Insurance is a requirement for borrowers who finance more than 80% of their home’s value, tacking on additional monthly expenses.
Increased Risk for Lenders
Without government backing, banks are taking on more risk which, in turn, can result in a less-competitive interest rate on your home loan.
Standard Qualification Procedures
Conventional options hold stricter qualification procedures that can put homeownership out of reach for some homebuyers.
Regulations and Fees
VA Loan is a federal program, however, the government doesn’t issue direct loans to veterans. The loan is provided by private lenders and banks and the Department of Veterans Affairs offers a guaranty.
This guaranty protects the lending agency against total loss if the buyer defaults, offering an incentive for private lenders to extend loans with better terms.
Click here to Learn About Credit Score Requirements
Loan Limits
Qualifying veterans with their full VA loan entitlement can borrow the maximum amount a lender is willing to offer, without any down payment. The VA loan limits only apply for buyers with less than their full entitlement, either because they have one or more active VA loans or because they’ve lost a previous one to foreclosure. To check if VA loan limits will impact you, send us an email at info@va.org.
Check more details about loan limits.
Funding Fees
The VA Funding Fee goes straight to the VA to ensure the program continues to run for future generations of Veteran and military homebuyers by eliminating any additional burdens off taxpayers and veterans. The fee differs depending on the borrower’s conditions and does not apply for veterans with service-connected disabilities. For example, if this is your first time using the VA Home Loan Program, the funding fee is typically 2.3 percent of the purchase price of the home. For consequent use of your VA Loan benefit, the fee is 3.6 percent.
VA borrowers can roll the funding fee into their overall loan amount. The VA also restricts closing costs for veterans and allows sellers to pay most or all of those expenses. Many Veterans purchase a home with no money due at closing.
Learn More about closing costs and down payment.