VA Purchase Loan Guide: Buying a Home With Your VA Benefit

The VA purchase loan (VA calls it a VA-backed purchase loan) is the product most veterans mean when they say "my VA loan." A private lender funds it. The Department of Veterans Affairs (VA) guarantees up to 25% of the loan, so the lender can drop the down payment and the private mortgage insurance (PMI) it would otherwise need.

What that means at the closing table:

• No down payment as long as the price is not above the appraised value.
• No PMI and no monthly mortgage-insurance premium, which is where a Federal Housing Administration (FHA) loan costs more every month for the life of the loan.
• Limited closing costs. VA caps what a lender can charge and lets the seller pay your costs.
• No prepayment penalty.
• Reusable. You can use it again after you sell, and in some cases while you still hold a prior VA loan.

The trade-off is the funding fee (2.15% on a first zero-down purchase) and the rule that the home must be your residence. Program basics and refinancing are in the VA home loan pillar guide and the deeper VA home loan guide. This page covers the purchase itself.

Three things have to be true, per VA's purchase-loan page:

1. You qualify for a Certificate of Eligibility (COE).
2. You meet VA's and the lender's credit and income standards.
3. You will live in the home you are buying.

The COE. For most Gulf War-era veterans (August 2, 1990 to now) that means 24 continuous months of active duty, or the full period you were called up (at least 90 days). Guard and Reserve members need 90 days of non-training Title 10 active duty or 6 creditable years. Every period needs a discharge that is other than dishonorable. Your lender can pull the COE in seconds through VA's Web LGY system, or you can request it online or with VA Form 26-1880. The Certificate of Eligibility guide covers the documents for each service type.

Credit. VA sets no minimum credit score. Lenders set their own floors, commonly 580 to 620, and price the rate by score.

Income. 38 CFR 36.4340 uses 2 tests. The debt-to-income (DTI) standard is 41% or less. Above 41%, the loan can still be approved if your residual income (what is left after the mortgage payment, other debts and taxes) beats VA's regional table by at least 20%, or the underwriter documents why the loan is sound. For a loan of $80,000 or more, a family of 4 needs at least $1,025 a month of residual income in the Northeast, $1,003 in the Midwest and South, and $1,117 in the West.

Occupancy. Under 38 U.S.C. 3704(c) you certify that you intend to occupy the home. VA's Lenders Handbook (VA Pamphlet 26-7, Chapter 3) treats moving in within 60 days of closing as reasonable. If you are on active duty and cannot be there, your spouse's occupancy counts, and so does a dependent child's.

VA's purchase-loan page lists what the loan can do. Read it as the complete list.

You can buy or build:

• A single-family home, including a townhouse or row house.
• A home with 2, 3 or 4 units, if you live in 1 of them.
• A condominium unit in a project on VA's approved list.
• A manufactured home, a lot for one, or both.
• New construction, through a VA construction loan or by buying the finished home from the builder.
• A home you will buy and improve at the same time (VA's alteration and repair option).

You cannot use a VA purchase loan for:

• A vacation home or second home you will not live in.
• An investment property you will rent out entirely.
• Bare land with no plan to build on it.
• A property that is mainly commercial rather than residential.

The property also has to meet VA's Minimum Property Requirements (MPRs), the construction and acceptability standards in 38 CFR 36.4351. A fixer-upper can work if the seller does the repairs before closing or you use the alteration-and-repair option. The property requirements guide lists the common MPR failures and how they get resolved.

Condos. The unit has to be in a project VA has approved. Your lender checks VA's condo list before ordering the appraisal. If the project is not on it, the lender can ask VA to review and approve the project, which takes time and is not guaranteed. Ask before you write the offer.

2- to 4-unit homes. You must occupy 1 unit as your home. Under 38 CFR 36.4340, the lender may count 75% of the rent on the other units toward your qualifying income, but only if you show a reasonable likelihood of success as a landlord and have cash reserves to cover 6 months of principal, interest, taxes and insurance without the rent.

Manufactured homes. VA's purchase-loan page allows a manufactured home or lot. A home that is not permanently affixed to a foundation carries a 1% funding fee instead of the standard rate, and fewer lenders offer these loans. A home on a permanent foundation, titled as real estate, is treated like any other house.

New construction. You can use the loan to build, or to buy a completed new home from a builder. Builders register with VA's Construction and Valuation section, and the finished home still has to meet MPRs. Fewer lenders offer true VA construction loans, so many veterans buy the completed home from the builder instead.

Energy and repair add-ons. VA also allows an Energy Efficient Mortgage (EEM) add-on for improvements like insulation, and the alteration-and-repair option for renovations financed into the purchase. Not every VA lender offers them; ask early.

Federal trust land. If you are a Native American veteran, or married to one, buying on federal trust land, the Native American Direct Loan is the product to look at instead. VA lends it directly, and VA says the rate starts at 2.5%.

Entitlement is the amount VA will guarantee for you. If you have never used it, or you sold your last VA-financed home and paid the loan off, you have full entitlement and no VA loan limit. You can buy above the conforming limit with nothing down if you qualify for the payment.

If you still have a VA loan open, or VA took a loss on a past loan that you never repaid, your remaining entitlement is measured against the county loan limit. For 2026 the Federal Housing Finance Agency (FHFA) set the baseline at $832,750 for a 1-unit home, with a ceiling of $1,249,125 in high-cost counties and $1,873,675 in Alaska, Hawaii, Guam and the U.S. Virgin Islands. Limits for 2- to 4-unit homes are set separately; check the 2026 VA home loan limits post for your county.

Source: https://www.va.gov/housing-assistance/home-loans/loan-limits/ and https://www.fhfa.gov/news/news-release/fhfa-announces-conforming-loan-limit-values-for-2026, effective January 1, 2026.

Example: you keep your first home and its VA loan, which used $60,000 of entitlement, and buy in a baseline county. 25% of $832,750 is $208,187.50. Subtract $60,000 and you have $148,187.50 left, which supports a $592,750 loan with nothing down. The VA home loan guide has the full math and the restoration rules.

The funding fee. The purchase percentages below have been in effect since April 7, 2023 and are set by 38 U.S.C. 3729 through June 8, 2034. "First use" means you have never had a VA-guaranteed loan.

Source: https://www.va.gov/housing-assistance/home-loans/funding-fee-and-closing-costs/, effective April 7, 2023.

You pay nothing if you receive VA compensation for a service-connected disability (any compensable rating, not "10% or more"), if you are eligible for compensation but receive retirement or active-duty pay instead, if you are a service member with a proposed or memorandum rating issued before closing, if you are a surviving spouse receiving Dependency and Indemnity Compensation (DIC), or if you are on active duty and show evidence of a Purple Heart on or before closing. If VA later grants compensation with an effective date before your closing date, you can ask for the fee back. The fee is the only closing cost you may finance on a purchase; everything else is paid at closing. Whether you can deduct it is covered in the VA funding fee tax deduction post.

Closing costs you may pay. 38 CFR 36.4313 lists them: the VA appraisal and any compliance inspection, credit report, recording fees and taxes, prepaid property taxes and insurance and the escrow deposit, hazard insurance, a survey if required, title examination and title insurance, flood-zone determination, discount points, and the lender's flat charge of up to 1% of the loan (the origination fee). If the lender takes the 1% flat charge, it cannot add its own processing, underwriting or document fees on top.

Closing costs you may not pay. Brokerage fees for arranging the loan, and any lender charge outside the itemized list. Anything on the Closing Disclosure that does not fit the list is a seller, lender or agent cost, not yours.

Seller concessions: the 4% rule. The seller can pay any of your normal closing costs with no cap. On top of that, VA lets the seller give concessions worth up to 4% of the home's reasonable value. Concessions are things beyond normal closing costs: paying your funding fee, prepaying your taxes and insurance, paying off your credit cards or car loan so you qualify, or buying down your rate. On a $400,000 home that is up to $16,000 in concessions plus the ordinary closing costs.

Watch out: Concessions and closing costs are different buckets. A seller paying $9,000 of your title, recording and appraisal fees has not used any of the 4%. A seller paying your $8,600 funding fee has used $8,600 of it.

VA's home-buying process page lays out the order. The details below are what happens inside each step. The first-time homebuyer guide covers the parts that are not VA-specific.

1. Get pre-approved. Pick a lender that closes VA loans regularly, hand over your COE, pay stubs, tax returns and bank statements, and get a pre-approval letter. Compare at least 2 lenders on rate and the 1% flat fee.
2. Write the offer with the VA escape clause. VA's Buyer's Guide gives the required wording: you cannot lose your earnest money or be forced to close if the price is above the reasonable value VA sets, but you may go ahead anyway. Every VA contract must include it. Agents often attach it as a separate addendum titled the VA Amendatory Clause or VA Escape Clause; the effect is the same.
3. Order the inspection and the appraisal. The lender orders the VA appraisal; VA assigns the appraiser. Hire your own inspector at the same time. VA strongly recommends an inspection, and the appraisal is not one.
4. Tidewater, if the value looks short. Under VA Circular 26-03-11, an appraiser who expects to come in under the contract price must tell the lender's point of contact first. Your agent and lender then have 2 working days to send closed comparable sales (in a sales-grid format, with proof they closed) or pending contracts with a short narrative. The appraiser must address what was sent in the report.
5. Read the Notice of Value (NOV). It lists the value, the comparable sales, and any MPR repairs required before closing. If value is short or repairs are needed, see the next section.
6. Clear underwriting. The underwriter verifies income, assets, the NOV and any repair completion.
7. Review the Closing Disclosure. Your lender must give it to you at least 3 business days before closing. Check every fee against the allowed list above.
8. Close and move in. Sign, pay or finance the funding fee, and plan to occupy within 60 days.

A low VA appraisal is not the end of the deal. You have 4 options, and VA's home-buying page names 3 of them.

• Ask for a Reconsideration of Value (ROV). Send the lender valid sales data showing the home is worth more. The lender forwards it to the appraiser, and VA staff review the report with the new data. This is separate from Tidewater, which happens before the report is final.
• Renegotiate the price. Because of the escape clause, the seller knows you can walk. Many sellers meet the appraised value or split the gap.
• Pay the difference. You may close at the contract price by bringing the gap in cash. The gap cannot be financed into the VA loan.
• Walk away. The escape clause returns your earnest money if you cancel because the value is short.

Watch out: The escape clause only protects you if it is in the signed contract. Check it before you sign, not when the NOV arrives.

Assume first use, no exemption, a baseline-county purchase, and the seller paying ordinary closing costs.

Source: fee percentages from https://www.va.gov/housing-assistance/home-loans/funding-fee-and-closing-costs/, effective April 7, 2023; arithmetic is ours.

The monthly payment depends on the rate you lock plus property taxes and insurance, which vary by county and by your disability rating where states exempt veterans. Run your numbers in the VA loan rate estimator; the veterans guide to property taxes and insurance costs and the home insurance benefits guide cover the part of the payment VA does not control.

Questions about your COE or entitlement go to VA's home loan line at 877-827-3702, Monday through Friday, 8:00 a.m. to 6:00 p.m. ET.

VA's rules are the same in every state, but the cost of owning is not. Texas, California, Oregon, Wisconsin and Alaska run state veteran home-loan programs that can be used with or instead of a VA loan, and most states offer a property-tax exemption tied to your disability rating that lowers your monthly escrow. Select your state to see what applies.