What a VA loan is and how it differs from a conventional mortgage

A VA loan is a mortgage backed by the U.S. Department of Veterans Affairs. The VA does not lend the money itself — a bank or mortgage lender does — but the VA guarantees a portion of the loan, which means the lender is protected if you stop paying. Because the lender has less risk, VA loans typically come with lower interest rates, no down payment requirement, and no mortgage insurance, even if you borrow the full home price.

A conventional mortgage requires you to put down 3 to 20 percent of the purchase price upfront and pay private mortgage insurance if your down payment is less than 20 percent. A VA loan lets you buy a home with zero down and no insurance premium added to your monthly payment. Over the life of a 30-year loan, this difference can save you tens of thousands of dollars.

The VA also sets a limit on how much a lender can charge you in closing costs, and you cannot be required to pay certain fees at all. A lender can charge you an origination fee, appraisal, credit report, and title insurance, but cannot charge you for a VA appraisal or underwriting review.

Key Takeaways

  • VA loans are mortgages may provide by the Department of Veterans Affairs, allowing you to borrow without a down payment or mortgage insurance.
  • You must have served on active duty, in the Reserve or National Guard, or be a surviving spouse of a service member to use a VA loan.
  • The VA issues a Certificate of may be able to access that proves your service record; you provide this to your lender when you apply.
  • A VA loan can be used only to buy a home you will live in, not for investment properties or vacation homes.
  • The VA guarantees only a portion of the loan amount, so lenders still review your credit, income, and debt before approving you.

Who is may be able to access for a VA loan

You are may be able to access for a VA loan if you served on active duty in the Army, Navy, Air Force, Marine Corps, or Coast Guard, or if you served in the Reserve or National Guard under federal orders. The length of service required depends on when you served. Generally, active-duty service members need at least 90 days of continuous service; Reserve and Guard members need at least six years, though some shorter periods of active duty can count.

Surviving spouses of service members who died in the line of duty or from a service-connected disability are also may be able to access. If you are a surviving spouse who remarried after the service member's death, you may still be may be able to access depending on when you remarried.

You do not need to have been discharged with an honorable discharge to use a VA loan — other-than-honorable discharges may also may have access to, though dishonorable discharges do not. If you are unsure about your own status, the VA can review your discharge papers.

How to get a Certificate of may be able to access

Before you apply for a VA loan, you need a Certificate of may be able to access, a document from the VA that proves you meet the service requirements. You can request this certificate online through VA.gov, by mail, or in person at a VA regional office.

To apply online, go to VA.gov and log in with your VA.gov account, DS Logon, or My HealtheVet credentials. You can also use Login.gov. The online application takes about 10 minutes, and the VA typically mails the certificate within two weeks. If you apply by mail, send a completed VA Form 26-1880 to your regional VA office; this takes longer, usually four to six weeks.

Once you have the certificate, you give it to your lender when you start the mortgage application. Some lenders can request it directly from the VA on your behalf, so ask whether you need to provide it yourself.

What a VA loan can and cannot be used for

A VA loan can be used only to purchase a home you intend to live in as your primary residence. You cannot use it to buy an investment property, a vacation home, or a second home. The VA requires that you occupy the property within a reasonable time after closing, typically within 60 days.

You can use a VA loan to buy a single-family home, a condo, a townhouse, or a manufactured home that meets VA standards. The property must be in the United States or in certain U.S. territories. You cannot use a VA loan to build a home from scratch, though some lenders offer VA construction loans as a separate product.

A VA loan can also be used to refinance an existing mortgage into a VA loan, through a product called a VA Interest Rate Reduction Refinance Loan (IRRRL). This is useful if you have a conventional mortgage and want to switch to a VA loan to lower your rate or remove mortgage insurance.

How the VA may provide works and what it means for you

The VA does not may provide the entire loan amount. Instead, it guarantees a portion — called the VA may provide or entitlement — which protects the lender if you default. The may provide amount depends on the loan size and your remaining entitlement. For most loans, the VA guarantees 25 percent of the loan amount, up to a maximum of around $144,000 (this figure changes yearly).

Because the lender is protected by this may provide, they are willing to lend you the full purchase price without requiring a down payment. However, the lender still checks your credit score, income, and debt-to-income ratio before approving you. A VA loan is not automatic; you still have to may have access to based on your finances.

If you default on the loan, the VA pays the lender the may provide amount, and the lender can foreclose on the home to recover the rest. The VA may then pursue you for the amount it paid out, though it has some authority to waive this in hardship cases.

Interest rates, fees, and monthly costs

VA loan interest rates are typically lower than conventional mortgage rates because the lender's risk is reduced by the VA may provide. The exact rate you receive depends on market conditions, your credit score, the loan amount, and the lender you choose. Rates vary between lenders, so it is worth getting quotes from multiple banks or mortgage companies.

The VA limits the fees a lender can charge. You can be charged an origination fee (usually 1 percent of the loan amount), an appraisal fee, a credit report fee, and title insurance. You cannot be charged for a VA appraisal, underwriting, processing, or document preparation. Some lenders waive the origination fee to compete for your business.

Your monthly payment includes principal and interest, but not mortgage insurance — a major cost savings compared to conventional loans. You will still pay property taxes and homeowners insurance, which are not part of the VA loan itself. If the property is in a flood zone, you will also pay flood insurance.

How to use your VA loan entitlement more than once

Your VA loan entitlement is not a one-time benefit. You can use it multiple times throughout your life, as long as you have remaining entitlement. When you pay off a VA loan, your entitlement is restored and you can use it again to buy another home.

If you sell a home you bought with a VA loan and pay off the loan, your full entitlement comes back. If you still owe money on the VA loan when you sell, your entitlement is only partially restored — the amount restored equals the VA may provide that was used on that loan.

You can also have more than one VA loan at the same time. Some service members use a VA loan to buy a home, move for work, and then use their entitlement again to buy another home while keeping the first property as a rental. However, the VA requires that you occupy each new property as your primary residence at the time of purchase.

Frequently Asked Questions

Do I need a down payment for a VA loan?

No. VA loans require zero down payment, meaning you can borrow the full purchase price of the home. This is one of the main advantages over conventional mortgages, which typically require 3 to 20 percent down.

Can I use a VA loan if I am still on active duty?

Yes. You can use a VA loan while you are still serving on active duty, as long as you have completed the required length of service. You will need a Certificate of may be able to access, which you can request through VA.gov even while on active duty.

What is the maximum loan amount for a VA loan?

There is no maximum loan amount set by the VA itself. The limit depends on your remaining entitlement and what the lender is willing to approve based on your income and credit. However, lenders typically have their own maximum loan amounts, often $500,000 to $1 million or more depending on the market.

Can I use a VA loan to buy a home with someone who is not a veteran?

Yes. You can co-borrow with a spouse, family member, or anyone else. The non-veteran co-borrower does not need to meet any VA requirements, but both of you will be responsible for repaying the loan. The lender will review both borrowers' credit and income.

What happens to my VA loan if I get divorced?

Your VA loan remains your responsibility unless the divorce decree specifically assigns it to your ex-spouse. If your ex-spouse takes over the loan and you want to restore your entitlement for future use, you may be able to do so by having your ex-spouse assume the VA loan formally. Consult with a VA loan specialist or attorney about your specific situation.