A VA loan is one of the best ways for military members and veterans to buy a home. VA loans do not require a down payment or private mortgage insurance, and interest rates are generally lower than with conventional mortgages.
VA Loan Guide
What is a VA Loan?
A VA loan is a mortgage option available to service members, veterans and eligible surviving spouses. VA loans are guaranteed by the U.S. Department of Veterans Affairs, allowing private lenders to offer VA mortgages with excellent benefits like $0 down payment requirement, no PMI and lower interest rates than some other mortgage types.
How VA Loans Work
The Department of Veterans Affairs backs VA loans by committing to pay up to 25% of the original loan amount if the borrower defaults on their home loan. Lenders often refer to this commitment as the “VA guarantee.”
The VA guarantee acts as an insurance policy, allowing lenders to offer veterans and service members home financing with additional benefits that borrowers may not be able to get through a conventional mortgage.
The VA home loan program is similar to other government-backed mortgage options such as the U.S. Department of Agriculture loan, Federal Housing Administration loan or other subsidized VA loan alternatives.
Benefits of VA Loans
- Full financing – Of all the benefits of VA loans, the most popular, without a doubt, is that a VA loan does not require a down payment.
- Flexibility – VA loans can be used just like other types of mortgages. Depending on the VA loan type you choose, you can use one to purchase or refinance a single-family home, VA-approved condominium, farm residence or multi-family home (up to a four-plex).
- Payment toward closing costs – VA loans also allow property sellers to pay up to 4% of the purchase price of a home toward closing costs.
- No PMI – Another benefit of the VA loan is that there is no private mortgage insurance required. However, VA loans do require an upfront mortgage insurance premium: the VA loan funding fee. It can be added to your VA loan amount and financed over the term of the mortgage.
VA Loan vs. Conventional Loan
The VA loan differs from the conventional loan in several ways, making it an incredible option for qualifying veterans and service members.
|VA Loan||Conventional Loan|
|Eligible veterans and active-duty|
|Open to anyone|
|No down payment required||Minimum of 3% down|
|No PMI||Mandatory PMI for more than|
|Lower average interest rates||Low rates require great credit|
|Relaxed qualification guidelines||Standard qualification guidelines|
|VA funding fee||No funding fee|
|Stricter appraisal requirements||Typical appraisal process|
Types of VA Loans
There are a variety of VA loan types to choose from depending on your situation. Whether you want to buy a new home or extract equity for a home project, there are plenty of options with the VA loan:
VA Purchase Loans
VA loans allow you to purchase a home with no down payment and at lower rates on average. VA loans have relaxed credit qualifications and no PMI, making them an attractive option to eligible veterans and service members.
Streamline Refinance (IRRRL) Loans
Interest Rate Reduction Refinance Loans, or IRRRLs, are an efficient way to refinance your existing VA mortgage. Also called a streamline refinance, this loan type is ideal for those wanting to take advantage of lower interest rates.
Cash-Out Refinance Loans
Cash-out refinance loans allow you to take “cash out” from your home’s existing equity.
Other VA Loan Types
Other, less common VA loan types include the following:
- VA Energy Efficient Mortgage – This mortgage type allows eligible veterans and service members to finance energy-efficient improvements to your existing VA-backed property.
- VA Rehab and Renovation Loans – This loan type is for eligible veterans who want to purchase and repair a property with a VA mortgage.
- Native American Direct Loan (NADL) – The Native American Direct Loan is for Native American veterans who wish to purchase, build or improve a property on Federal Trust land. Refinancing is also available through the NADL program.
VA Loan Eligibility Requirements
VA loans are restricted to veterans only. It’s also generally easier for a veteran to qualify for a VA loan based on income and credit than with a conventional mortgage.
To be eligible for a VA loan, you have to meet one or more of the following criteria:
- You’ve served at least 90 consecutive days of active service during wartime.
- You’ve served at least 181 days of active service during peacetime.
- You have at least six years of service in either the National Guard or the Reserves.
- You are the spouse of a service member who died in the line of duty or as a result of a service-related disability.
10 Best VA Loan Lenders for 2022
A VA loan is not offered by the Department of Veteran Affairs but rather by companies that provide loans backed by the VA.
We reviewed some of the best VA loan providers.
|Veterans United||Best Veteran-Focused|
|Rocket Mortgage||Best for Refinancing|
|United Wholesale Mortgage||Best for Loan Variety|
|Freedom Mortgage||Best for Rate Reduction Refinance|
|Pennymac||Best for In-House Servicing|
|Navy Federal Credit Union||Best Credit Union|
|loanDepot||Best for Jumbo Loans|
|USAA||Best Total Package|
|Fairway Independent Mortgage||Best for Face-to-Face|
|Caliber Home Loans||Best for Cash-Out|
These 10 lenders specialize in originating VA loans. The process will go more smoothly than with a local bank that only writes one or two of these mortgages each year.
As specialists, they are generally better able to field your questions, obtain the proper paperwork on time and coordinate the requirements of a VA loan.
How To Apply for a VA Loan
Applying for a VA loan is really no more complicated than applying for any other mortgage type.
For the most part, you won’t be dealing with the VA itself but with the mortgage lender, which can be both an advantage and a disadvantage.
You’ll need to complete the application paperwork and supply certain documents, including recent pay stubs, W-2s and bank statements.
You’ll also need to obtain your VA Certificate of Eligibility, but the mortgage lender can usually help you with this process.
You’ll also need to provide a copy of your discharge papers showing that you are honorably discharged or a copy of your DD Form 214.
Is the VA Loan Right for Me?
If you’re an eligible veteran, the VA loan is a great option that has many benefits. Of course, everyone has a different situation, so the best way to start is by getting preapproved and seeing if you’re eligible for the VA loan.
Thank you for your service!
Equal Housing Opportunity. The Department of Veterans Affairs affirmatively administers the VA Home Loan Program by assuring that all Veterans are given an equal opportunity to buy homes with VA assistance. Federal law requires all VA Home Loan Program participants – builders, brokers and lenders offering housing for sale with VA financing – must comply with Fair Housing Laws and may not discriminate based on the race, color, religion, sex, handicap, familial status, or national origin of the Veteran.