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.
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.
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Related Terms
FHA Loan
Real EstateAn FHA loan is a government-backed mortgage insured by the Federal Housing Administration that allows qualified borrowers to purchase homes with down payments as low as 3.5% and requires mortgage insurance premiums (MIP) for the life of the loan in most cases.
Conventional Loan
Real EstateA 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
Real EstateA 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
Real EstateClosing 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.