A Comprehensive Guide to the VA Loan

The VA Loan does not have to be complicated.

Read the guide below to arm yourself with the right knowledge for a successful home purchase using the VA Loan.

What is the VA Loan?
VA Loans are a mortgage benefit offered to veterans, active duty military, and eligible surviving spouses by the U.S. Department of Veterans Affairs (VA). These loans are designed to help you purchase a home with favorable terms, including no down payment and competitive interest rates.

 

VA Home Loan for Active Duty Military

VA Loans Explained

What is the VA Loan?

VA Loans are a mortgage benefit offered to veterans, active duty military, and eligible surviving spouses by the U.S. Department of Veterans Affairs (VA). These loans are designed to help you purchase a home with favorable terms, including no down payment and competitive interest rates.

Contents

Benefits

Benefits of Using the VA Loan

One of the most appealing aspects of VA loans is the ability to secure 100 percent financing, meaning no down payment is required. Furthermore, VA loan borrowers are exempt from monthly insurance premiums like private mortgage insurance (PMI) or mortgage insurance premium (MIP). Additionally, veterans may qualify for more competitive interest rates compared to conventional loans.

0% Down PaymentNo Private Mortgage Insurance
Competitive Interest RatesStreamlined Refinance

Eligibility

VA Loan Eligibility

VA Loans are a mortgage benefit offered to veterans, active duty military, and eligible surviving spouses by the U.S. Department of Veterans Affairs (VA). These loans are designed to help you purchase a home with favorable terms, including no down payment and competitive interest rates.

VA Eligibility Requirements

To qualify for a VA loan, you have to meet one or more of the following:

  • You served 90 consecutive days of active service during wartime
  • You served 180 days of active service during peacetime
  • You have 6 years of service in the National Guard or Reserve, or served 90 days under Title 10 or Title 32 orders
  • You are a spouse of a service member who died while serving or due to a service-related disability

Common Questions

Common Questions About the VA Loan
Can you use a VA loan multiple times, even simultaneously?Yes
Is there an expiration date on VA loan benefits?No
Are there size limits for VA loans?No
Can service-connected disabilities affect VA home loan terms?Yes
Can active-duty military personnel use VA loans?Yes
Are National Guard and Reserve members eligible for VA loans?Yes

Benefits

What is the VA Funding Fee?

The VA imposes a funding fee on every VA loan, with rates determined by your Certificate of Eligibility (COE). This fee can be paid in different ways: by the buyer at closing, by the seller at closing, or by rolling it into the loan. Notably, the funding fee is waived for veterans with a service-connected disability of 10 percent or greater.

For first-time users without a disability, the fee is 2.15%, while subsequent use loans carry a 3.3% fee. A 5% down payment reduces the fee to 1.5%, and a 10% down payment further reduces it to 1.25%. Active-duty military can apply to have the funding fee waived before separation or retirement.

VA Purchase or Construction Loans
Down Payment Funding Fee
First Use Less than 5% 2.15%
5% or more 1.5%
10% or more 1.25%
Subsequent Use Less than 5% 3.3%
5% or more 1.5%
10% or more 1.25%
VA Cash-Out Refinance
First Use - 2.15%
Subsequent Use - 3.3%
VA Interest Rate Reduction Refinance Loan (IRRRL)
First Use - 0.5%
Subsequent Use - 0.5%
VA Loan Assumption
First Use - 0.5%
Subsequent Use - 0.5%
Start Your VA Loan

Benefits

VA Home Inspection

While the VA loan appraisal process includes a habitability check, it doesn’t replace a comprehensive home inspection. VA loans require an inspection for wood-destroying organisms (termite inspections). If your home is going to have a well as the primary source of water, that will also need to be inspected.

The good news is that these inspections can now be paid for by either the buyer or seller, eliminating the previous requirement for sellers to cover the cost.

Benefits

VA Mandatory Occupancy

VA loans are exclusively for primary residence purchases. The veteran or spouse must move into the home within 60 days of closing and reside there for at least one year before considering renting or selling it.

However, valid changes in circumstances, such as deployments or job changes, can provide flexibility in meeting the one-year occupancy requirement.

Benefits

VA Eligible Property Types

VA loans can be used for various property types, including single-family homes, condos, townhomes, duplexes, triplexes, quads, mobile/manufactured homes (when owned with the land), and new construction.

However, VA loans cannot be used for commercial property, raw land, undeveloped lots, or investment homes.

VA Eligible Properties NOT VA Eligible
Single Family Home
Commercial Property
Condominium Raw Land
Townhouse Undeveloped Lots
Multi-Unit (2-4 units)
Investment Homes
Mobile/Manufactured Home
New Construction
Questions over a specific property? Talk with one of our VA loan specialists!

Benefits

What is the VA Interest Rate Reduction Refinance Loan (VA IRRRL)?

The VA IRRRL (pronounced like your favorite Uncle Earl), also known as a VA Streamlined Refinance, offers veterans a streamlined way to reduce their VA loan interest rate by at least half a percent or more without the need for an appraisal, income verification, equity requirements, or a specific credit score.

This streamlined refinance option is a valuable tool for veterans to lower their monthly mortgage payments, especially during periods of declining interest rates.

The VA IRRRL serves as a powerful financial tool for veterans to save money on their mortgage payments without the typical requirements associated with traditional refinancing.

Benefits

Loan Comparisons

The two most commonly compared loans for military is the VA loan and the conventional loan. Both loan products can be the right choice based on the specific circumstances, however, the VA loan often has clear advantages when compared side by side in a standard home purchase.

VA Loan vs Conventional Loan


VA
Conventional
Credit Score As low as 500 Typically 620+
Down Payment 0% 3% or more
Eligibility Veteran, active-duty military, surviving spouses No restrictions
Interest Rates VA guarantees part of the loan, rates are usually lower than conventional Can be fixed or adjustable; rates usually higher than VA
Funding Fee Fee can be reduced with a down payment or, in some cases, waived N/A
Private Mortgage Insurance N/A Required if down payment is less than 20%
Property Requirements Must be a primary residence and pass VA appraisal standards Residential dwelling with no more than 4-units
Assumability If buyer meets VA eligibility requirements, loan can be assumed Most are not assumable

Loan Comparison Example

EXAMPLE

VA
Conventional
Purchase Price $500,000 $500,000
Term 30 Years 30 Years
Rate 5.63% 6.50%
Down Payment $0 or 0% $25,000 or 5%
Loan Amount $500,000 $475,000
Principal & Interest $2,878 $3,117
Mortgage Insurance $0 $114
COSTS over 10 Years
Mortgage Insurance $16,644
Additional Interest $44,640
Down Payment $25,000
TOTAL Additional COST
$86,284

Benefits

How do I Qualify for a VA Loan?

Qualification for a VA loan can vary among lenders and may be influenced by factors such as credit score requirements, the ability to use gift funds, and how different types of military income are treated. It’s essential to work with a lender who understands these nuances.

Get a free consultation with one of our VA loan specialists. >

Benefits

Getting Started on Your VA Loan

The first step in obtaining a VA loan is to speak with a military specialized lender to get pre-qualified. From there, you will submit specific documents to verify your income, debt-to-income ratio, prove eligibility and other requirements. Once you have a pre-qualification letter, then you can start house shopping!

Start Your VA Loan >

Helpful Resources

A straight-forward guide to the VA Loan. Download and print for a resource on the go.

Home buying is a journey. Use this roadmap to plan your next steps into home ownership.

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