What Is a VA Loan, and Who Can Apply for One?

A VA home loan can help eligible military borrowers purchase a home with no down payment and no monthly private mortgage insurance. But eligibility depends on military service or another qualifying status, and borrowers still need to meet a lender’s financial requirements.

The Department of Veterans Affairs (VA) generally doesn’t lend the money directly. Instead, private lenders issue VA-backed mortgages, and the VA guarantees part of the loan against losses if the borrower defaults.

That guarantee can help lenders offer favorable terms, but it doesn’t guarantee loan approval or mean every eligible borrower can afford a more expensive home.

Here’s how VA loans work, who may qualify, and what borrowers should know before applying.

Key Takeaways

1. VA-backed home loans are offered by private lenders and partially guaranteed by the Department of Veterans Affairs.
2. Eligible borrowers may be able to purchase a home with no down payment and no monthly mortgage insurance.
3. Veterans, active-duty service members, qualifying National Guard and Reserve members, and certain surviving spouses may qualify.
4. A Certificate of Eligibility confirms entitlement to the VA home loan benefit, but lenders still evaluate income, credit, debts, and the property.
5. Many borrowers pay a one-time VA funding fee, although certain borrowers are exempt.

What Is a VA Loan?

A VA loan is a mortgage available to eligible borrowers through the Department of Veterans Affairs’ home loan program. For most home purchases, the loan comes from a private lender, such as a bank, credit union, or mortgage company.

The VA guarantees a portion of the loan, reducing some of the lender’s risk. This guarantee can help make favorable mortgage terms available to eligible borrowers.

VA-backed mortgages aren’t the same as conventional loans. Conventional mortgages aren’t insured or guaranteed by a federal government agency.

VA loans can be used for several purposes, including purchasing, building, improving, or refinancing an eligible home.

This article focuses primarily on VA-backed purchase loans.

What Are the Benefits of a VA Loan?

A VA-backed purchase loan can offer several advantages over other mortgage programs.

No down payment in many cases. Eligible borrowers can often finance the purchase without a down payment, provided the home’s purchase price doesn’t exceed its appraised value and other requirements are met. A lender may still require a down payment in some circumstances.

No monthly mortgage insurance. VA-backed loans don’t require monthly private mortgage insurance, which can reduce recurring borrowing costs compared with some low-down-payment conventional loans.

Competitive loan terms. VA-backed loans may offer favorable interest rates, but rates vary by lender and borrower. Comparing offers is still important.

Reusable benefits. Eligible borrowers may be able to use their VA home loan benefit more than once, depending on their available entitlement and whether previously used entitlement can be restored.

However, VA loans aren’t free. Borrowers may still pay a funding fee, closing costs, interest, property taxes, and homeowners insurance.

The VA’s home loan overview explains the available programs and their general benefits.

Who Is Eligible for a VA Loan?

VA home loan eligibility depends primarily on military service history, duty status, and certain qualifying exceptions.

The requirements aren’t identical for every applicant.

Active-Duty Service Members

Current active-duty service members generally meet the minimum service requirement after 90 continuous days of active duty.

They must also satisfy the lender’s credit, income, and other loan requirements.

Veterans

Veterans may qualify based on their service period, length of service, and discharge circumstances.

For example, the VA generally requires veterans who served from August 2, 1990, to the present to have completed at least 24 continuous months or the full period of at least 90 days for which they were called to active duty, subject to qualifying exceptions.

Different rules apply to earlier service periods.

Some veterans who were discharged because of a service-connected disability or another qualifying reason may be eligible with less service.

A discharge classified as other than honorable, bad conduct, or dishonorable doesn’t necessarily resolve every eligibility question automatically. The VA may need to review the circumstances, and some applicants may qualify following a discharge upgrade or character-of-discharge review.

Because the rules vary, applicants should consult the VA’s current eligibility requirements rather than relying on a single service-length rule.

National Guard and Reserve Members

Members of the National Guard and Reserve may qualify through eligible active-duty service or qualifying years of service.

For example, some members qualify after at least 90 days of eligible non-training active-duty service.

Other applicants may qualify after six creditable years of service, provided they meet the applicable continued-service, retirement, or discharge requirements.

National Guard members may also qualify through certain Title 32 service.

The VA evaluates eligibility based on the type and length of service, not simply whether the applicant has served in the Guard or Reserve.

Certain Surviving Spouses

Some surviving spouses of veterans and spouses of service members who are missing in action or prisoners of war may qualify for VA home loan benefits.

Eligibility can depend on circumstances such as the veteran’s death, service connection, remarriage history, and the spouse’s eligibility for Dependency and Indemnity Compensation.

Being married to a veteran doesn’t automatically give a spouse independent eligibility for a VA loan.

The VA provides dedicated guidance on home loan eligibility and Certificate of Eligibility applications for surviving spouses.

Other Eligible Applicants

Certain other individuals may qualify, including some Public Health Service and National Oceanic and Atmospheric Administration officers and members of specific qualifying organizations.

The VA determines whether an applicant’s service or status meets the program requirements.

What Is a VA Certificate of Eligibility?

A Certificate of Eligibility, or COE, is a document showing that an applicant meets the service-related requirements for the VA home loan benefit.

It’s an important step in obtaining a VA-backed mortgage.

But a COE isn’t a mortgage preapproval.

It doesn’t establish the amount a lender will approve, guarantee an interest rate, or confirm that a particular home meets VA requirements.

Borrowers must still satisfy the lender’s financial standards.

How Do You Get a COE?

The VA allows applicants to request a COE in several ways:

1. Apply online through the VA.
2. Ask a participating lender to request the COE through the VA’s electronic system.
3. Submit the appropriate application by mail.

The documents required depend on the applicant’s status.

Veterans may need discharge or separation records, such as a DD214. Active-duty applicants may need a signed statement of service.

The VA explains the process in its guide to requesting a Certificate of Eligibility.

How Much Can You Borrow With a VA Loan?

The amount a borrower can qualify for depends on their finances and the lender’s underwriting standards.

Lenders evaluate factors such as income, debts, credit history, assets, and the proposed mortgage payment.

One important measure is the borrower’s debt-to-income ratio, which compares monthly debt obligations with gross monthly income. Learn more about how debt-to-income ratio affects mortgage qualification.

The VA doesn’t establish a universal minimum credit score for its home loan program, although individual lenders may impose their own requirements.

Borrowers with full VA entitlement generally don’t face a VA-imposed loan limit. That doesn’t mean they can borrow an unlimited amount.

The lender still determines how much the borrower can afford, and the property’s value affects the financing.

Borrowers with partial entitlement may face additional requirements tied to the amount of entitlement remaining and applicable county loan limits.

A COE confirms eligibility for the benefit. It doesn’t establish purchasing power.

Eligibility also doesn’t mean a homebuying budget will go equally far in every market. Movoto’s analysis of where veterans can afford the most homes with a VA loan examines how affordability varies across locations. You can estimate your loan payments with Lower’s VA loan calculator.

The VA’s home loan entitlement and limits guidance explains how these rules work.

What Is the VA Funding Fee?

The VA funding fee is a one-time charge that many borrowers pay when using a VA-backed or VA direct home loan.

The fee helps support the program, which generally doesn’t require a down payment or monthly mortgage insurance.

The amount depends on the loan type and, for many purchase loans, whether the borrower has used the benefit before and how much they put down.

How Much Is the VA Funding Fee?

For VA-backed purchase loans, the published funding-fee rates are:

Down payment	First use	Subsequent use
Less than 5%	2.15%	3.30%
5% to less than 10%	1.50%	1.50%
10% or more	1.25%	1.25%

These rates apply to borrowers who aren’t exempt from the funding fee. Other loan types, including certain refinancing loans, have different rates.

For example, suppose a first-time VA loan user buys a $400,000 home with a $25,000 down payment.

The down payment equals 6.25% of the purchase price, and the base loan amount is $375,000.

At a funding-fee rate of 1.5%, the fee would be $5,625.

The borrower could generally pay that fee at closing or finance it into the loan, subject to applicable requirements.

Financing the fee increases the loan balance and the interest paid over time.

Who Is Exempt From the VA Funding Fee?

Some borrowers don’t have to pay the funding fee.

Exemptions include certain borrowers who receive or are eligible to receive VA compensation for service-connected disabilities, qualifying surviving spouses receiving Dependency and Indemnity Compensation, and certain active-duty Purple Heart recipients.

Additional circumstances may qualify for an exemption.

Borrowers should verify their status with the VA and lender before closing.

The VA’s funding fee and closing costs page provides the current rates and exemption criteria.

Do VA Loans Require Closing Costs?

Yes. A zero-down-payment VA loan doesn’t mean a buyer can necessarily purchase a home with no money due at closing.

Buyers may still be responsible for expenses such as:

• Loan origination charges
• Appraisal fees
• Title and settlement services
• Recording fees and applicable taxes
• Prepaid homeowners insurance
• Prepaid property taxes and escrow deposits
• Discount points, if applicable

The buyer and seller may negotiate certain closing costs.

VA rules also distinguish ordinary closing-cost payments from seller concessions, which are generally limited to 4% of the home’s reasonable value.

That 4% limit doesn’t apply to every seller-paid closing cost. The VA treats certain items, such as payment of the funding fee or a buyer’s debt, as concessions.

For a VA purchase loan, the funding fee can generally be financed into the mortgage, but other closing costs ordinarily can’t simply be added to the loan balance.

Even when no down payment is required, a lender may need documentation showing that the borrower has sufficient funds for closing costs and other applicable expenses. Learn more about acceptable ways to show proof of funds.

Can VA Buyers Pay Their Own Real Estate Agent?

VA rules on buyer-agent compensation changed in 2024.

Under a temporary VA policy that took effect in August 2024 and remains in place until VA rescinds it, eligible borrowers may pay reasonable and customary buyer-agent fees in qualifying transactions. The seller may also agree to pay those fees.

Buyer-agent compensation is negotiable, and veterans aren’t automatically required to pay their agent’s fee.

When the buyer pays, VA rules don’t allow those charges to be added to the VA loan amount. The lender must account for them when determining whether the borrower has enough funds to close.

Ask your lender about the current requirements before signing a buyer-representation agreement or making an offer.

Buyers should review their Loan Estimate to understand the projected amount needed at closing.

How Do You Buy a House With a VA Loan?

The homebuying process resembles other mortgage transactions, but VA-backed financing includes a few additional steps.

1. Confirm Eligibility and Request a COE

Check the VA’s service requirements and obtain a Certificate of Eligibility.

A lender may be able to help request the COE.

2. Compare VA Lenders and Get Preapproved

Contact multiple lenders offering VA-backed mortgages.

Compare interest rates, annual percentage rates, closing costs, and lender requirements.

A preapproval can help establish a realistic price range, although it isn’t a guarantee of final approval.

3. Find an Eligible Home

Look for a property that fits your budget and meets the program’s occupancy requirements.

VA-backed purchase loans generally require the borrower to intend to occupy the property as a primary residence, subject to applicable exceptions.

4. Make an Offer and Complete the VA Appraisal

After the seller accepts an offer, the lender generally orders a VA appraisal.

The appraisal evaluates the property’s value and whether it meets applicable minimum property requirements.

It isn’t a substitute for a home inspection.

Buyers should consider obtaining an independent inspection to assess the property’s condition more thoroughly.

5. Resolve Financing and Property Issues

If the VA appraisal establishes a reasonable value below the agreed sale price, the buyer may be able to renegotiate the price, request a reconsideration of value through the lender, or contribute additional funds.

VA purchase contracts must include the VA escape clause when the contract is signed before the buyer receives the VA Notice of Value.

This provision allows the buyer to withdraw from the purchase without forfeiting their earnest money if the VA’s established reasonable value is below the contract price.

The buyer can also choose to proceed with the purchase, but may need to cover the difference between the agreed price and the VA-supported financing amount.

The escape clause doesn’t provide a general right to cancel for unrelated reasons, such as an unsatisfactory home inspection.

The lender also completes its review of the borrower’s finances and other loan conditions. This review is part of the mortgage underwriting process, which can affect how quickly a buyer reaches closing.

6. Review Closing Costs and Close

Before closing, review the final mortgage terms, funding-fee status, and cash required.

Confirm payment instructions independently with the closing company to reduce the risk of wire fraud.

Once the loan is approved and closing requirements are satisfied, the transaction can be completed.

Can You Use a VA Loan More Than Once?

Yes, potentially.

The VA home loan benefit isn’t necessarily limited to a borrower’s first home purchase.

Eligible borrowers may be able to restore previously used entitlement after selling a home and paying off the VA-backed loan.

Other circumstances may also permit entitlement restoration or use of remaining entitlement.

However, having used a VA loan before can affect the funding fee and the amount of entitlement available.

Borrowers should request an updated COE and discuss their circumstances with a participating lender.

Bottom Line

VA-backed home loans can make homeownership more accessible for eligible veterans, service members, and certain surviving spouses.

They often allow purchases with no down payment and don’t require monthly private mortgage insurance.

But eligibility for the VA benefit is only one part of qualifying for a mortgage.

Lenders still evaluate the borrower’s finances, the property must meet program requirements, and many borrowers pay a one-time funding fee.

Before applying, confirm your eligibility, obtain a Certificate of Eligibility, and compare offers from multiple VA lenders. The most useful comparison is the total cost of the mortgage—not just whether it requires a down payment.

The post What Is a VA Loan, and Who Can Apply for One? appeared first on Movoto Blog.