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What is a VA loan, and what are the requirements to qualify?

Updated 5 min read

Military service to your country is rewarded with an exclusive benefit to foster homeownership. A VA loan is unlike any other mortgage on the market, offering a home loan with no down payment, limited closing costs, and no private mortgage insurance. However, VA loans are offered only to those who have served in the military.

It's a well-deserved and valuable advantage to maximize home affordability, especially for a first-time home buyer. This is how the program works and what it takes to qualify for a VA home loan in 2024.

Read more: What are government home loans?

VA loans are mortgages issued by private mortgage lenders, including banks, credit unions, or mortgage providers, but are administered by the Department of Veterans Affairs, which guarantees a portion of the loan. That guarantee allows lenders greater flexibility in structuring the loan terms used to finance the purchase of a single-family home, condo, multi-unit property, manufactured house, or new construction.

Current service members, veterans, and eligible surviving spouses may qualify for a VA loan.

Learn more: 12 popular types of houses

Most (90%) VA home loans are made without a down payment. The VA doesn't require a down payment, but lenders can add loan requirements to manage their credit risk. It's the same with credit scores: The VA doesn't set a minimum qualifying credit score for a home loan, but lenders often do.

Tip: These "lender overlays" — qualifying requirements beyond those specified by a guarantor — are a primary reason for borrowers to shop around for the best VA loan lenders. According to the CFPB, borrowers could save $100 a month or more by shopping for the best mortgage deal.

Generally, the VA loan benefits for a borrower with full entitlement include:

  • No down payment.

  • No loan limit.

  • Fewer closing costs. Lenders are limited to the amount they can charge, and according to the VA, closing costs “may be paid by the seller, lender, or any other party.”

  • No private mortgage insurance (PMI).

  • The flexibility to purchase and fund repairs that are completed after closing.

Read more:

One cost unique to a VA loan that shouldn't be overlooked is the VA funding fee. It is not insignificant and can blindside a borrower.

The VA funding fee is typically 1.40% to 2.30% of the loan amount for the first-time use of a purchase loan. It can be paid in cash at closing, financed as part of the mortgage loan, or paid by the lender or home seller as a concession.

There can be exemptions for the payment of the funding fee, including for certain veterans with a service-connected disability and for some unremarried surviving spouses of veterans.

Read more: How a VA streamline refinance (VA IRRRL) works

Mortgage lenders may stipulate how much you can borrow, but the VA does not have specified loan limits for borrowers with a full entitlement. And while there is no minimum-income requirement, the VA needs proof that you will have "income remaining after paying your mortgage and other financial obligations."

The home being financed must be your primary residence, and you must meet one of the following:

  1. An active-duty service member. The minimum active-duty-service requirements depend on when you served.

  2. A veteran of the armed forces, including Reserve and National Guard members.

  3. An eligible spouse.

There are quite a few qualifiers to the above standards. Here is a complete list of service requirements. Even if it seems you don't meet the minimum-service requirements, be sure to examine the details of active-service and veteran qualifications.

Particular circumstances of a discharge can also qualify you for a VA mortgage loan.

You will need to provide proof of your qualifications for a VA mortgage. That is supplied with a Certificate of Eligibility (COE). Approved VA lenders will have access to an online tool that can provide the information within minutes. You can also get a COE online at VA.gov or submit a VA Form 26-1880 via mail.

Specific loan-eligibility requirements vary by lender, but generally, VA loans require a borrower to:

  • Meet a minimum credit score requirement. The VA does not set this, and it varies by lender. While FICO 620 is often mentioned as the preferred entry-level credit score, Yahoo Finance found minimum credit scores at a sampling of major VA lenders to be 550, 580, and 600.

  • Fall within certain debt-to-income limits. The VA also doesn't mandate a maximum debt-to-income ratio (DTI), but lenders often look for a DTI of less than 50%.

Read more: Getting a mortgage with good (but not great) credit

  • No down payment is required.

  • You have the option to use an adjustable-rate mortgage.

  • No PMI.

  • Closing costs are capped and some fees may be paid by others.

  • VA loans are assumable.

  • You'll likely owe a VA funding fee.

Learn more: How VA cash-out refinancing works

VA loans have a lot of benefits: You don't need a down payment, and you could end up paying less in closing costs than with other types of mortgages. VA loans are also assumable, which means the mortgage can be transferred from one borrower to another. Conventional loans typically aren't assumable.

The main downside of a VA loan is that you'll have to pay a funding fee of 1.25% to 3.30% of your loan amount. However, this is a one-time payment at closing, whereas most other home loan types make you pay for mortgage insurance both at closing and as part of your monthly payment.

You don't need any down payment for a VA loan. You'll just have to pay for closing costs, including a funding fee of 1.25% to 3.30% of your mortgage amount (unless you opt to roll the cost into your mortgage principal instead).

The military service requirement is the most difficult part of qualifying for a VA loan. Otherwise, it's relatively easy to qualify — you don't need a down payment, and lenders may allow for a DTI ratio of up to 50%.