VA Loans: A Complete Guide for Veterans and Service Members

VA loans are government-backed mortgages available to eligible veterans, active-duty service members, and surviving spouses. They may allow zero down payment with no private mortgage insurance required, subject to VA and lender guidelines.

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What Is a VA Loan?

A VA loan is a mortgage backed by the U.S. Department of Veterans Affairs. It’s one of the most significant benefits available to eligible military service members, veterans, and surviving spouses. VA loans are originated by private lenders like Homebuyer Inside Track and guaranteed by the VA, which allows lenders to offer favorable terms without requiring private mortgage insurance.

Who May Be Eligible for a VA Loan

Eligibility is based on your service history. You may be eligible if you are:

  • An active-duty service member who meets minimum service requirements
  • A veteran who was honorably discharged
  • A National Guard or Reserve member who meets certain service thresholds
  • The surviving spouse of a veteran who died in service or from a service-connected disability

You’ll need to obtain a Certificate of Eligibility (COE) to confirm your eligibility. The lender you work with can help you obtain your COE through the VA.

Key Benefits

  • No down payment required in most cases, as long as the sales price does not exceed the home’s appraised value
  • No private mortgage insurance (PMI) - unlike conventional loans with less than 20% down, VA loans do not require PMI
  • Competitive interest rates (subject to your credit and scenario)
  • No prepayment penalty
  • The benefit can be used more than once in many situations
  • Assumable by a qualified buyer

VA Funding Fee

Most VA borrowers pay a one-time VA funding fee, which helps sustain the VA loan program at no additional cost to taxpayers. The fee varies based on whether it’s your first use of the benefit, the loan type, and your down payment amount. As of April 7, 2023, the fee for a first-use purchase loan with no down payment is 2.15%; subsequent use is 3.30%. Making a down payment of 5% or more reduces the fee to 1.5%, and 10% or more reduces it to 1.25%. The funding fee can be financed into the loan or paid at closing.

Certain borrowers are exempt from the funding fee, including veterans receiving VA compensation for a service-connected disability, surviving spouses receiving Dependency and Indemnity Compensation (DIC), and active-duty service members who received a Purple Heart. Talk with the lender you work with about whether you may qualify for a fee exemption.

VA Loan Limits

VA no longer enforces a maximum loan amount for eligible borrowers with full entitlement. However, lenders may have their own limits for VA loans above conforming thresholds. Borrowers with partial entitlement (due to an existing VA loan or previous loss) may have county-based loan limits apply, based on FHFA conforming loan limits for their area.

Property Requirements

VA loans are for primary residences only. The property must meet VA Minimum Property Requirements (MPRs), which ensure the home is safe, structurally sound, and sanitary. A VA-approved appraiser will assess the property during the appraisal process.

Limitations

  • Primary residence only (no investment properties or vacation homes)
  • VA funding fee applies (unless exempt)
  • Property must meet VA MPRs
  • Some property types (condos, manufactured homes) require additional VA approval

Frequently Asked Questions

Who is eligible for a VA loan?

Eligibility is based on your military service history. Generally, active-duty service members, veterans with honorable discharge, National Guard and Reserve members meeting service thresholds, and surviving spouses of veterans who died in service or from service-connected disabilities may be eligible. You'll need a Certificate of Eligibility (COE), which the lender you work with can help you obtain. See full eligibility requirements at VA.gov.

Does a VA loan require a down payment?

In most cases, no. VA loans allow eligible borrowers with full entitlement to purchase a home with no down payment, as long as the sales price does not exceed the home's appraised value. However, making a down payment can reduce or eliminate the VA funding fee and lower your monthly payment. Discuss your specific scenario with a licensed lender. Source: VA Purchase Loan.

What is the VA funding fee?

The VA funding fee is a one-time fee paid at closing or financed into the loan. It helps sustain the VA loan program. As of April 7, 2023, the rate for a first-use purchase with no down payment is 2.15% (3.30% for subsequent use). The amount also depends on your loan type and down payment amount. Veterans receiving VA disability compensation, surviving spouses receiving DIC, and Purple Heart recipients may be exempt. Source: VA Funding Fee and Closing Costs.

Can I use my VA loan benefit more than once?

In most cases, yes. VA loan entitlement can be restored after paying off a VA loan and selling the property, or in some cases even while you still have an existing VA loan (called bonus entitlement). Contact a licensed lender about your specific entitlement situation. Source: VA Loan Entitlement and Limits.

Can I buy a multi-unit property with a VA loan?

Yes. VA loans can be used to purchase properties with up to four units, as long as you intend to occupy one unit as your primary residence. This can allow you to use rental income from the other units, subject to VA and lender guidelines. Source: VA Purchase Loan.

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Subject to credit, income, property, program, and lender guidelines. Contact us with questions about your specific scenario.

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