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VA Loans: What to Know

VA loans are for current and veteran service members and eligible spouses. These mortgages have competitive interest rates and usually require no down payment.

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VA loans play an important role in helping those who serve and have served in the military buy a home. Here’s what you need to know about VA loans: how they work, who can get them, VA loan benefits, types of VA loans and VA loan fees.

VA loan: Summary

  • Military service members, veterans and certain surviving spouses are eligible to apply.

  • VA loans are backed by the U.S. Department of Veterans Affairs, but issued by private lenders.

  • VA mortgages usually require no down payment.

  • VA loans have competitive interest rates, relaxed credit qualifying standards and no mortgage insurance requirements.

  • VA loan borrowers pay a one-time funding fee.

What is a VA loan?

A VA loan is a mortgage issued by a private lender, such as a bank or mortgage company, and partly guaranteed by the Department of Veterans Affairs. The guarantee means the government will repay the lender a portion of the loan if the borrower doesn’t make payments. Because of the government backing, lenders can offer favorable terms, such as competitive interest rates, and usually require no down payment. Only qualified U.S. veterans, active-duty military personnel and certain surviving spouses are eligible for VA loans.

How does a VA loan work?

You’ll complete the loan process with the mortgage lender of your choice, just like everyone else, but with some key differences along the way.

For example, you’ll need to apply for a VA certificate of eligibility, which shows that you are eligible for a VA-backed loan. You can apply for the certificate on the VA’s website or by mail, or apply through your lender. Most lenders have access to the VA’s Web-based application. Often a certificate of eligibility can be issued in seconds.

Although the VA has no minimum credit score requirement, lenders usually require scores of at least 620. A few lenders will approve loans with credit scores as low as 580. And a borrower must be able to afford a home. The VA takes a real-life view of affordability by estimating the ability to pay the home loan after accounting for other monthly expenses.

Who can get a VA loan?

Access to VA loans is an important perk for military service members and veterans.

You are likely to be eligible for a VA mortgage if:

  • You are active-duty military.

  • You were separated from military service in a situation “other than dishonorable discharge.”

  • You meet specific length-of-service requirements.

  • You are a reservist or a member of the National Guard.

  • You are a qualified surviving spouse of a deceased veteran.

In addition, there are these VA loan requirements:

  • The home must be your primary residence.

  • You must have a valid certificate of eligibility from the VA.

  • You must satisfy credit score requirements set by your lender.

VA loan benefits

A VA loan comes with a variety of advantages, which can put buying a home within easier reach.

  • Down payments aren’t required unless the purchase price is more than the appraised value of the property or it's higher than the local VA loan limit.

  • VA loan rates are typically lower than conventional loan rates.

  • No mortgage insurance is required.

  • Counseling is available to help borrowers retain a home through serious financial difficulties.

  • Credit qualifying standards are relaxed.

  • Limited closing costs.

  • You don't have to be a first-time home buyer.

  • You can use your VA loan to finance repairs and renovations.

  • VA-backed loans can be assumable. This means they can be taken over by the person who buys your house, even if he or she isn't a service member.

  • You can still get a VA loan even if you've declared bankruptcy in the past.

Types of VA loans

Home purchase

A VA loan can be used to buy an existing home or a condominium in a VA-approved development or to build a home.

Cash-out refinance

VA cash-out refi replaces your mortgage with a new loan while tapping some of your home’s value for things like paying off debt or making home improvements. It also can be used to replace a non-VA loan with a VA loan.

Interest rate reduction refinance loan

A VA IRRRL (which is pronounced "Earl") is also called a streamline refinance loan. You can replace an existing VA loan with a mortgage offering a lower interest rate, or move from an adjustable-rate loan to one with a fixed interest rate.

Native American Direct Loan program

This helps qualified Native American veterans buy, build, improve or refinance a home located on federal trust land.

Adapted housing grants

These help veterans with service-related disabilities purchase, build or modify homes for better livability.

VA loan fees

Although mortgage insurance isn’t required on VA loans, a “funding fee” serves the same purpose: to help lenders cover the cost of foreclosing on borrowers who default. The fee ranges from 1.25% to 3.3% of the loan balance, depending on your down payment, branch of the military and whether or not it’s your first VA loan.

Next steps to find a VA lender

Once you've determined that you are eligible for a VA loan, it’s time to find the best VA lender for your situation.

  1. Review the best VA lenders in a variety of categories.

  2. Compare VA mortgage rates and fees from at least three of the best VA lenders in your area.

  3. Get a mortgage preapproval so you know your price range. Use the NerdWallet mortgage preapproval tool, which you can customize by indicating that you're a veteran.

  4. Check out our guide to refinancing a VA loan if you're already a homeowner.