VA Loan
A VA loan is a government-backed mortgage guaranteed by the U.S. Department of Veterans Affairs for eligible veterans, active-duty service members, and surviving spouses, featuring 0% down payment, no private mortgage insurance (PMI), and competitive interest rates.
š¬ Video Explanation
Exam Tip
VA = 0% down, NO PMI. For veterans/service members only. Primary residence only. Funding fee required (waived for disabled vets). Government GUARANTEED, not funded.
What is a VA Loan?
A VA loan is a mortgage loan program established by the U.S. government to help veterans, active-duty service members, National Guard/Reserve members, and eligible surviving spouses achieve homeownership. The Department of Veterans Affairs guarantees a portion of the loan, allowing private lenders to offer favorable terms including no down payment and no PMI.
Key Benefits
| Benefit | Description |
|---|---|
| 0% Down Payment | No down payment required for most borrowers |
| No PMI | No private mortgage insurance required |
| Competitive Rates | Typically lower than conventional loans |
| No Prepayment Penalty | Can pay off early without fees |
| Limited Closing Costs | VA limits what veterans can be charged |
| No Loan Limit | No VA-imposed maximum for borrowers with full entitlement |
Eligibility Requirements
| Service Type | Minimum Service Requirement |
|---|---|
| Wartime Active Duty | 90 consecutive days |
| Peacetime Active Duty | 181 days |
| National Guard/Reserves | 6 years (or 90 days if called to active duty) |
| Surviving Spouse | Spouse died in service or from service-related disability |
VA Loan vs. FHA vs. Conventional
| Feature | VA Loan | FHA Loan | Conventional |
|---|---|---|---|
| Down Payment | 0% | 3.5% minimum | 3-20% |
| Mortgage Insurance | None (funding fee instead) | MIP required | PMI if < 20% down |
| Credit Score Minimum | No VA minimum (lenders often want 620) | 580 with 3.5% down | 620+ typically |
| Who Qualifies | Veterans/service members only | Any qualified buyer | Any qualified buyer |
| Loan Limits | None with full entitlement | $498,257 (2024) | $766,550 conforming (2024) |
| Property Type | Primary residence only | Primary residence | Primary, second home, investment |
VA Funding Fee
| Down Payment | First-Time Use | Subsequent Use |
|---|---|---|
| 0% | 2.15% | 3.30% |
| 5-9.99% | 1.50% | 1.50% |
| 10%+ | 1.25% | 1.25% |
Funding Fee Exemptions:
- Veterans receiving VA disability compensation
- Surviving spouses of veterans who died in service
- Purple Heart recipients on active duty
Certificate of Eligibility (COE)
| How to Obtain | Details |
|---|---|
| eBenefits Portal | VA's online system |
| Through Lender | Most lenders can access instantly |
| By Mail | Submit VA Form 26-1880 |
Property Requirements
| Requirement | Description |
|---|---|
| Primary Residence | Must be owner-occupied |
| VA Appraisal | Required to verify value and condition |
| Minimum Property Requirements (MPRs) | Must be safe, sound, and sanitary |
| Move-in Ready | Generally must be habitable at closing |
VA Entitlement
| Entitlement Type | Description |
|---|---|
| Full Entitlement | Never used VA loan OR fully restored |
| Partial Entitlement | Some entitlement in use (existing VA loan) |
| Bonus Entitlement | Additional amount for high-cost areas |
2024-2025 Loan Limits
| Scenario | Limit |
|---|---|
| Full Entitlement | No VA-imposed limit |
| Partial Entitlement | $766,550 baseline (higher in high-cost areas) |
| High-Cost Areas | Up to $1,149,825 |
VA Loan Types
| Type | Purpose |
|---|---|
| Purchase Loan | Buy a home |
| Cash-Out Refinance | Access home equity |
| IRRRL (Streamline) | Refinance existing VA loan |
| Native American Direct Loan | For veterans on federal trust land |
| Adapted Housing Grants | For veterans with service-connected disabilities |
Exam Alert
VA loan = government GUARANTEED (not government-funded). Key features: 0% down, NO PMI, competitive rates. Only for veterans/service members and eligible surviving spouses. Must be PRIMARY RESIDENCE. Funding fee required (2.15%-3.30%) unless exempt. COE (Certificate of Eligibility) proves eligibility. VA appraisal required to ensure property meets Minimum Property Requirements.
Study This Term In
Related Terms
FHA Loan
An FHA loan is a mortgage insured by the Federal Housing Administration, designed for first-time and lower-income homebuyers with lower down payment requirements (3.5%) and more flexible credit standards, requiring mortgage insurance premium (MIP).
Conventional Loan
A conventional loan is a mortgage not insured or guaranteed by a government agency (unlike FHA, VA, or USDA loans), typically requiring a 20% down payment to avoid private mortgage insurance (PMI).
Mortgage
A mortgage is a loan used to purchase real estate, where the property serves as collateral, typically repaid over 15-30 years with interest.
Closing Costs
Closing costs are fees and expenses paid at the real estate closing beyond the property price, typically 2-5% of the loan amount, including lender fees, title insurance, escrow, and prepaid items.
PMI (Private Mortgage Insurance)
Private Mortgage Insurance (PMI) is insurance required on conventional loans when the down payment is less than 20%, protecting the LENDER (not the borrower) against default. PMI can be canceled once the borrower reaches 20% equity, unlike FHA mortgage insurance.
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