The VA loan is a $0 down mortgage option available to Veterans, Service Members and select military spouses. VA loans are issued by private lenders, such as a mortgage company or bank, and guaranteed by the U.S. Department of Veterans Affairs (VA).
The VA home loan was created in 1944 by the United States government to help returning service members purchase homes without needing a down payment or excellent credit. This historic program has guaranteed more than 25 million VA loans, helping Veterans, active duty military members and their families purchase or refinance a home.
Today, the VA mortgage is more important than ever. Scores of Veteran and military buyers found it increasingly difficult to get home financing in the wake of the Great Recession, and many lenders tightened their guidelines again because of the 2020 global pandemic.
Over the last decade in particular, VA loans have provided a lifeline for Veterans and active Military homebuyers facing higher credit score and down payment requirements.
VA loans are a specialized loan product, but they aren’t more difficult or cumbersome than other types of home loans. This VA loan guide is here to provide you with the tools necessary to navigate your VA home purchase or refinance and get the most out of your hard-earned benefit.
If you're ready to start your VA loan, check your eligibility or have specific questions on the VA loan, talk with a Veterans United Home Loans specialist today.Start Your Quote Online →
Veteran and military homebuyers have access to one of the most unique and powerful loan programs ever created. See how the VA Loan compares to a traditional home mortgage:
|VA Loans||Conventional Loans|
(for qualified borrowers)
VA loans are among the last 0% down home loans available on the market today.
Up to 20% Down
Conventional loans generally require down payments that can reach up to 20% to secure a home loan, pushing them out of reach for many homebuyers.
Since VA loans are government backed, banks do not require you to buy Private Mortgage Insurance.
Private Mortgage Insurance is typically required for borrowers who finance more than 80% of their home's value, tacking on additional monthly expenses.
Competitive Interest Rates
VA loans have had the lowest average fixed interest rate on the market for more than five years in a row, according to data from Ellie Mae.
Low Rates at a Cost
Buyers often need top-tier credit scores in order to tap into the best conventional mortgage rates. With VA loans, Veterans have access to low rates without the need for sky-high credit.
Easier to Qualify
The VA loan is a hard-earned job benefit created to expand access to homeownership for Veterans and service members. More flexible and forgiving credit underwriting guidelines are a hallmark of the program.
Standard Qualification Procedures
Conventional mortgage options often require higher credit scores and down payment requirements than VA loans, along with stricter underwriting guidelines in some cases.
The VA loan benefit offers qualified Veterans multiple powerful home financing options.
Veterans and service members can use the VA loan to purchase new or existing homes with $0 down payment. VA purchase loans also allow Veterans to buy single-family homes, condominiums, manufactured homes, multiunit properties (like a duplex) and even new construction.
Policies and guidelines can vary by lender. Some lenders may not make all of these types of VA purchase loans.
The VA Interest Rate Reduction Refinance Loan (IRRRL) is one of the VA loan program's two refinance options and the one most Veteran homeowners choose.
These are also known as VA Streamlines, and that's because they're simple, low-cost refinance loans that in some cases might not require credit underwriting, income verification or an appraisal.
The VA IRRRL is only for Veterans who currently have a VA loan, require your new rate is smaller than your old rate and have a limit on the time it takes to recoup the costs and fees. All of which help ensure Veterans realize the full financial benefit.
The VA Cash-Out refinance allows qualified homeowners to refinance their mortgage and take out cash from their home's equity. These loans are open to Veterans with and without current VA loans. Qualified homeowners can typically refinance up to 90 percent of their home's value.
Lending guidelines and loan-to-value requirements can vary by lender. Homeowners are not required to take out cash with these loans, which means Veterans with non-VA mortgages can use this option as a basic rate-and-term refinance.
The VA allows Veterans to borrow additional money to pay for energy efficiency improvements to a home, as part of either a home purchase or a refinance.
Veterans can finance up to an extra $6,000 to cover the cost of qualified improvements, like storm or thermal windows, heat pumps and solar heating and cooling systems. Homeowners can't use this option to purchase appliances, window air conditioning units and other non-permanent additions.
The VA loan program has helped generations of Veterans, service members and military families achieve the dream of homeownership. At the heart of this benefit is a promise: Because of their selfless service to our country, Veterans have access to a home loan program with flexible guidelines and significant financial benefits, chiefly the ability to purchase with no down payment.
Let’s take a closer look at how VA loans work and what it takes to start the VA loan process.
Although the VA loan is a federal program, the government generally does not make direct loans to Veterans. Instead, private lenders including Veterans United Home Loans finance the loan while the Department of Veterans Affairs offers a guaranty.
This guaranty protects the lender against total loss should the buyer default, which provides an incentive for private lenders to offer the VA loan with better terms than other mortgage options.
Qualified veterans with their full VA loan entitlement can borrow as much as a lender is willing to extend, all without a down payment. The VA loan limits only come into play for buyers with less than their full entitlement, either because they have one or more active VA loans or because they’ve lost a previous one to foreclosure. To see how the VA loan limits might affect you, give us a call at 1-800-884-5560.
The VA Funding Fee goes directly to the VA to ensure the program keeps running for future generations of Veteran and military homebuyers by removing any additional burdens off taxpayers and Veterans.
The fee varies depending on the borrower's circumstances. For example, if this is your first time using the VA home loan program, the funding fee is typically 2.3 percent of the purchase price of the home. For subsequent use of your VA loan benefit, the fee is 3.6 percent. The fee for an Interest Rate Reduction Refinance loan is just 0.5 percent, no matter how many times you’ve used the benefit.
VA borrowers can roll the funding fee into their overall loan amount. The VA also limits closing costs for Veterans and allows sellers to pay most or all of those expenses. Many of our borrowers purchase a home with no money due at closing, but every buyer’s situation is different.
The VA also exempts some Veterans and surviving spouses from the funding fee entirely. The most common exemption is for Veterans receiving compensation for a service-connected disability. Surviving spouses with VA loan eligibility are also exempt. Only the VA can make a determination about funding fee exemptions.
To calculate your VA Funding Fee, use Veterans United Home Loans' Funding Fee Calculator here.
VA loans are arguably the most powerful loan option on the market. They come with a list of big-time benefits, including $0 down payment, no mortgage insurance, flexible and forgiving credit guidelines and the industry's lowest average fixed interest rates.
Every Veteran buyer's situation is different, and going over all of your loan options with a home loan specialist can help ensure you make the best financial decision possible.
Talk with a trusted lender that knows VA loans and how to get the most from this hard-earned benefit. The process typically starts with getting preapproved, which can often be done in minutes using your phone, laptop or tablet.
Loan preapproval is a key first step before making an offer on your dream home. Having that preapproval letter gives you a clear sense of your buying power and shows sellers and listing agents you have what it takes to get to closing.
Yes, this is not a one-time option. Once you earn the VA loan benefit, it's yours for life. You can reuse the VA loan over and over again, and it's even possible to have more than one active VA loan at the same time.
Continue to learn more about VA loan eligibility in our next section.