Loan types
VA loans: how they work and who qualifies
Quick answer
A VA loan is a mortgage guaranteed by the U.S. Department of Veterans Affairs for eligible veterans, active-duty service members and some surviving spouses. It allows 0% down, charges no monthly mortgage insurance, and has no VA loan limit with full entitlement. Most borrowers pay a one-time funding fee of 1.25% to 3.3%.
For people who have served, a VA loan is usually the strongest mortgage available. It removes the two biggest hurdles for most buyers — the down payment and monthly mortgage insurance — in exchange for a one-time fee that many veterans don't even have to pay. Here's how it works and where the fine print is.
What a VA loan actually is
The VA doesn't lend the money. A private lender (bank, credit union or mortgage company) makes the loan, and the Department of Veterans Affairs guarantees part of it. That guarantee is why lenders can offer 0% down and skip mortgage insurance: if the borrower defaults, the VA covers a portion of the lender's loss.
A real example
On a $350,000 home with 0% down, a first-time VA borrower pays a 2.15% funding fee of $7,525, usually rolled into the loan for a total balance of $357,525. There is no monthly mortgage insurance. The same buyer using FHA would need $12,250 down and would pay about $150 a month in mortgage insurance, often for the life of the loan.
Who is eligible
- Veterans who meet minimum service requirements (generally 90 days of active service in wartime or 181 days in peacetime, or six years in the Guard or Reserves)
- Active-duty service members after 90 continuous days of service
- National Guard and Reserve members who meet service-time rules
- Some surviving spouses of service members who died in service or from a service-connected disability
Eligibility is confirmed with a Certificate of Eligibility (COE). Most lenders can pull it for you online in minutes.
The VA funding fee
Instead of monthly mortgage insurance, VA charges a one-time funding fee. It can be paid at closing or added to the loan. Purchase-loan rates have been unchanged since April 2023:
| Down payment | First use | Subsequent use |
|---|---|---|
| Less than 5% | 2.15% | 3.30% |
| 5% to less than 10% | 1.50% | 1.50% |
| 10% or more | 1.25% | 1.25% |
Who doesn't pay it: veterans receiving VA compensation for a service-connected disability, surviving spouses receiving Dependency and Indemnity Compensation (DIC), and active-duty Purple Heart recipients. Your COE shows whether you're exempt.
Credit, income and DTI guidelines
The VA sets no minimum credit score, but most lenders want 580 to 640. VA uses a 41% debt-to-income guideline, but it isn't a hard cap. The more important test is residual income: how much money is left each month after your mortgage, debts and estimated living costs, based on family size and region. Strong residual income can get a loan approved above 41% DTI.
Loan limits and entitlement
Since 2020, borrowers with full entitlement have no VA loan limit — you can borrow as much as a lender will approve with 0% down. If you have an active VA loan or a prior one that wasn't fully repaid, you have partial entitlement, and you may need a down payment on loans above your county's conforming limit ($832,750 in most counties in 2026).
Property and occupancy rules
VA loans are for a primary residence — you generally must move in within 60 days. You can buy a 1–4 unit property as long as you live in one unit. The home must pass a VA appraisal that checks it's safe, sound and sanitary. Approved condos must be on the VA condo list.
VA vs FHA vs conventional
| Factor | VA | FHA | Conventional |
|---|---|---|---|
| Minimum down | 0% | 3.5% | 3% |
| Monthly mortgage insurance | None | Yes, often for life of loan | Yes under 20% down, cancels later |
| Upfront fee | 1.25%–3.3% (some exempt) | 1.75% | None |
| Typical credit floor | 580–640 (lender) | 580 | 620 |
For an eligible borrower, VA is almost always cheaper than FHA. Conventional can win if you're putting 20% down and aren't exempt from the funding fee.
Frequently asked questions
Can I use a VA loan more than once?
Yes. VA entitlement can be reused. If you sell the home and repay the loan, your full entitlement is restored. You can even have two VA loans at once if you have enough remaining entitlement, though the funding fee is higher on subsequent use with less than 5% down.
Do VA loans have higher interest rates?
Usually the opposite. Because of the government guarantee, VA rates are often lower than conventional rates for the same borrower. Compare the full Loan Estimate, including the funding fee, from at least two lenders.
Can the seller pay my closing costs on a VA loan?
Yes. Sellers can pay all of your normal closing costs, plus up to 4% of the price in additional concessions such as paying the funding fee or paying off debts.
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