A VA loan is a mortgage backed by the Department of Veterans Affairs that lets you buy a home with no down payment and no mortgage insurance

The VA does not lend you money directly. Instead, a bank or mortgage lender gives you the loan, and the VA guarantees a portion of it to the lender. That may provide means the lender takes less risk, so they offer you better terms: no down payment required, no private mortgage insurance (PMI), and usually a lower interest rate than a conventional mortgage.

You must be a current or former member of the military to use a VA loan. The program has been around since 1944 and is one of the few mortgage programs that requires nothing down. The catch is that you have to meet the VA's service requirements and get a Certificate of may be able to access before any lender will consider your application.

Key Takeaways

  • VA loans require no down payment and no mortgage insurance, which saves thousands of dollars compared to conventional mortgages.
  • You must obtain a Certificate of may be able to access from the VA before applying to a lender, which takes a few days to a few weeks depending on how you apply.
  • The VA guarantees only a portion of the loan amount, so lenders still set their own credit score and income requirements.
  • You pay a one-time funding fee to the VA (usually 2 to 3 percent of the loan amount) unless you are exempt due to disability or other reasons.
  • A VA loan can be used only to buy a home you will live in, not for investment properties or second homes.

Who can use a VA loan

You are may be able to access if you served on active duty in the Army, Navy, Air Force, Marine Corps, or Coast Guard, or if you are a current member of the National Guard or Reserves. The length of service required depends on when you served. Generally, you need at least 90 days of active duty during wartime or 181 days during peacetime. If you were dishonorably discharged, you cannot use the program.

Surviving spouses of service members who died in service or from a service-connected disability may also be may be able to access. The VA website has a tool to check your status, but the official way to confirm is to request your Certificate of may be able to access, which the VA will issue or deny based on your military records.

Getting your Certificate of may be able to access

Before you contact a lender, you need a Certificate of may be able to access from the VA. This document proves to the lender that you meet the service requirements. You can request it online through VA.gov, by mail, or by phone at 1-888-442-4551.

The fastest route is the VA website. You log in with your military credentials (DS Login, My HealtheVet, or ID.me) and request the certificate. The VA usually issues it within a few minutes to a few hours. If you apply by mail or phone, it takes one to two weeks. Once you have it, you can take it to any lender that offers VA loans.

What the VA funding fee covers

Most borrowers pay a funding fee to the VA, which is a one-time charge added to your loan amount. The fee is usually 2 to 3 percent of the total loan, depending on whether this is your first VA loan and how much you are putting down (even though you do not have to put anything down). For a $300,000 loan, the fee might be $6,000 to $9,000.

You do not pay this fee upfront. It is rolled into your mortgage, so you pay it over time as part of your monthly payment. You are exempt from the funding fee if you receive VA disability compensation or if you are a surviving spouse of someone who died in service.

Loan limits and how much you can borrow

The VA does not set a maximum loan amount. Instead, it sets a guaranty amount — the portion of the loan the VA will cover if you default. The guaranty is usually 25 percent of the loan, up to a maximum of around $36,000 (this amount changes yearly). Lenders use this guaranty to decide how much they will lend you.

In practice, most lenders will lend you more than the guaranty amount because the guaranty covers their biggest losses. How much you can borrow depends on your income, credit score, and debt-to-income ratio, just like any mortgage. A lender might approve you for $400,000 even though the VA guaranty is only $36,000, because the guaranty protects them against the worst-case scenario.

What you cannot use a VA loan for

A VA loan is for buying a home you will live in as your primary residence. You cannot use it to buy a second home, a vacation property, or an investment property. You also cannot use it to refinance a non-VA loan into a VA loan, though there is a separate VA refinance program (called an IRRRL) if you already have a VA loan.

The home must be a single-family house, a condo, a townhouse, or a manufactured home that meets VA standards. The VA will order an appraisal to make sure the home is worth what you are paying and that it is safe to live in.

Interest rates and closing costs

VA loans typically have lower interest rates than conventional mortgages because the VA may provide reduces the lender's risk. The exact rate depends on the lender, the current market, your credit score, and the loan term (15, 20, or 30 years). You should shop around with multiple lenders to compare rates.

You cannot be charged certain closing costs on a VA loan. The seller can pay some of your closing costs, and the lender cannot charge you an origination fee or a processing fee. However, you will pay for the appraisal, title search, and homeowners insurance. The VA funding fee is also a cost, though it is rolled into the loan amount.

Frequently Asked Questions

Can I use a VA loan if I was dishonorably discharged?

No. A dishonorable discharge makes you ineligible for VA benefits, including VA loans. Other discharge statuses (honorable, general, other than honorable) may be may be able to access depending on the circumstances. The VA will tell you when you request your Certificate of may be able to access.

Do I have to use the full VA loan benefit, or can I use it partially?

You do not have to use it at all. Some veterans use a conventional mortgage instead. If you do use a VA loan, you can borrow any amount the lender approves you for — there is no minimum. You do not have to max out the benefit.

What happens if I sell the house before the loan is paid off?

You can sell at any time. Your VA loan benefit is restored once the loan is paid off, so you can use it again to buy another home. Some veterans use their VA loan benefit multiple times over their lifetime.

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

Yes. You must have at least 90 days of active duty (or 181 days in peacetime), but you do not have to be separated from the military. You can apply while still serving. Your Certificate of may be able to access will show your remaining entitlement.

What is the difference between a VA loan and a VA-backed loan?

They are the same thing. "VA-backed" just means the VA guarantees part of the loan. The VA does not lend the money itself — a private lender does, and the VA backs it up.