What is a VA Home Loan?

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VA loans are home loans backed (guaranteed) by the U.S. Department of Veterans Affairs (VA).

They are designed to help eligible veterans, active-duty service members, National Guard/Reserve members, and certain surviving spouses become homeowners with favorable terms.

The VA does not lend money directly. Instead, it guarantees a portion of the loan made by a VA-approved lender, reducing risk for the lender and allowing better terms for the borrower.

Qualified borrowers can purchase a home with 0% down (in most cases).

Unlike conventional and FHA loans, VA loans do not require monthly mortgage insurance, even with no down payment.

Because the loan is government-backed, interest rates are often lower than conventional loans.

VA loans are generally more forgiving regarding:

• Credit history 
• Debt-to-income (DTI) ratios
   

The VA limits certain fees lenders can charge, helping reduce upfront costs.

Most borrowers pay a VA funding fee, which helps sustain the program.

• Typically ranges from 1.25% to 3.3% of the loan amount 
• Can be rolled into the loan
• May be waived for veterans with service-connected disabilities
   

To qualify, borrowers generally must:

• Meet service requirements
• Obtain a Certificate of Eligibility (COE) 
• Use the property as their primary residence
   

As of 2020, borrowers with full entitlement typically do not have a VA loan limit, but lenders may impose limits based on underwriting standards.

• VA Purchase Loan 
• VA Cash-Out Refinance 
• VA Interest Rate Reduction Refinance Loan (IRRRL) 
• Native American Direct Loan (NADL)
   

FeatureVA LoanFHA LoanConventionalDown Payment0%3.5%3%–5%Mortgage InsuranceNoneRequiredRequired <20%Credit FlexibilityHighModerateModerateEligible BorrowersMilitaryGeneral publicGeneral public  

• Veterans and active-duty service members 
• Military families wanting to preserve savings 
• Borrowers seeking low upfront costs