VA Loans

VA loan benefits are among the most valuable financial tools available to eligible service members and veterans, and they are consistently underused. No down payment on any loan amount. No private mortgage insurance ever. Rates that are typically lower than conventional loans. Most eligible veterans who do not pursue a VA loan believe either that they do not qualify or that the process is too complicated. Both assumptions are usually wrong.

What a VA Loan Is and How It Works

The Department of Veterans Affairs guarantees a portion of the loan to the lender, reducing the lender's risk and enabling better terms than most borrowers can access through other channels. The VA does not lend money directly. It backs private lenders who do, giving them the confidence to offer terms they could not otherwise justify.

VA Loan Eligibility: Who Qualifies

• Veterans: 90 days of active duty during wartime, or 181 days during peacetime, with an honorable discharge.
• Active duty service members: 90 or more continuous days of active service.
• National Guard and Reserve members: Six years of service, or 90 days of active duty. Many Guard and Reserve members do not realize they qualify -- this is one of the most commonly overlooked paths to VA eligibility.
• Surviving spouses: Unmarried surviving spouses of service members who died in service or from a service-connected disability.

You need a Certificate of Eligibility to apply. You can request one at VA.gov, or your lender can pull it directly during the application process, which is often faster.

The Four Benefits That Make This Loan Worth Pursuing

• Zero down payment, on any loan amount: Available for first-time buyers and repeat homebuyers alike. No other mainstream loan type offers this without income restrictions.
• No private mortgage insurance, ever: Conventional loans require PMI on anything below 20 percent down. VA loans never have PMI. On a $400,000 loan, that saves $130 to $200 per month compared to a conventional loan with 5 percent down.
• Competitive interest rates: VA loan rates are typically below conventional rates because the government guarantee reduces lender risk. The no-down-payment loan actually comes with better rates than loans requiring cash down.
• Regulated closing costs: The VA limits which fees lenders can charge VA borrowers. Your total closing costs are typically lower than on an equivalent conventional loan.

The VA Funding Fee -- and Why It Is Still Worth It

VA loans charge a one-time funding fee instead of ongoing PMI. The fee is a percentage of the loan amount and varies based on your down payment and whether this is your first VA loan:

• First use, zero down: 2.15% -- on a $400,000 loan, that is $8,600
• First use, 5 to 9 percent down: 1.50%
• First use, 10 percent or more down: 1.25%
• Subsequent use, zero down: 3.30%

The funding fee can be financed into the loan -- you do not pay it at closing. Veterans receiving VA disability compensation have the funding fee waived entirely.

What the VA Requires

• The property must be your primary residence -- no investment properties or vacation homes
• The home must meet VA Minimum Property Requirements covering safety, structural soundness, and sanitation
• The VA sets no minimum credit score, but most lenders require 620 or higher in practice
• No maximum loan amount for most borrowers, though high-balance VA loans in expensive markets have different guarantee structures

VA Versus FHA Versus Conventional: The Actual Numbers

For a veteran with 680 credit buying a $400,000 home:

• VA: Zero down, approximately 6.75% rate, no PMI, $8,600 funding fee financed in -- lowest monthly payment of the three options
• FHA: $14,000 down at 3.5%, approximately 7.0% rate, $183 per month in permanent MIP -- moderate monthly payment
• Conventional: $20,000 down at 5%, approximately 7.25% rate, $150 per month in PMI that eventually drops -- highest cash required at closing

For most veterans, the VA loan wins on both monthly payment and total cost over any holding period past three years. Exhaust VA loan options before considering anything else.