A VA loan is a mortgage backed by the Department of Veterans Affairs that lets may be able to access military members and veterans buy a home with no down payment

A VA loan is a home loan program run by the Department of Veterans Affairs. The VA does not lend the money itself — a bank or mortgage lender does. What the VA does is may provide part of the loan, which means if you stop paying, the VA covers the lender's loss up to a certain amount. Because the lender has this may provide, they are willing to lend to you without requiring a down payment, without requiring private mortgage insurance, and often at a lower interest rate than a conventional mortgage.

The may provide exists because you served in the military. If you are on active duty, a veteran, or a surviving spouse of a service member, you may be able to use this benefit. The VA does not charge you a fee to use the loan — though most lenders charge a one-time funding fee that gets rolled into your loan amount, and you pay property taxes and homeowners insurance like any other buyer.

Key Takeaways

  • A VA loan requires no down payment and no private mortgage insurance, which saves money compared to a conventional mortgage.
  • The Department of Veterans Affairs guarantees the loan to the lender, but a bank or mortgage company actually lends you the money.
  • You must have served in the military or be a surviving spouse to use a VA loan, and you need a Certificate of may be able to access from the VA to prove it.
  • Most VA loans charge a one-time funding fee paid at closing, though some borrowers are exempt from this fee.
  • You can use a VA loan more than once, and you can use it to buy a home, build a home, or refinance an existing mortgage.

Who can use a VA loan

You can use a VA loan if you served on active duty in the Army, Navy, Air Force, Marines, Coast Guard, or Space Force. The length of service required varies by when you served. Generally, if you served at least 90 days of active duty during wartime or 181 days during peacetime, you may be may be able to access. If you are still on active duty, you may be may be able to access after 90 days of service.

Surviving spouses of service members who died in the line of duty or from a service-connected disability can also use VA loans. If your spouse was a veteran with unused VA loan benefits, you may be able to use those benefits after their death.

To prove you are may be able to access, you need a Certificate of may be able to access from the VA. You can request this certificate online through VA.gov, by mail, or through your lender — most lenders can request it on your behalf as part of the mortgage process.

How a VA loan differs from a conventional mortgage

The biggest difference is the down payment. With a conventional mortgage, lenders typically require 3 to 20 percent down. With a VA loan, you can buy a home with zero down. This means you do not need to save thousands of dollars before you can buy.

A second difference is private mortgage insurance. When you put down less than 20 percent on a conventional loan, the lender requires you to pay private mortgage insurance, or PMI, every month. VA loans do not require PMI, no matter how much you put down. This saves you money every month for the life of the loan.

VA loans also tend to have lower interest rates than conventional loans because the VA may provide makes them less risky for the lender. The exact rate depends on the lender and current market conditions, but the difference can save you tens of thousands of dollars over 30 years.

One cost that VA loans do have is a funding fee, a one-time charge paid at closing. The funding fee is usually between 1 and 3.6 percent of the loan amount, depending on whether you are buying a home for the first time with a VA loan and how much you put down. Some borrowers, including those with service-connected disabilities rated at 0 percent or higher, are exempt from the funding fee.

What you can use a VA loan for

A VA loan can be used to buy a single-family home, a condo, a townhouse, or a multi-unit property (up to four units, if you live in one of them). You can also use a VA loan to build a new home from the ground up, or to refinance an existing mortgage into a VA loan.

You cannot use a VA loan to buy an investment property or a vacation home. The home must be for your own use as a primary residence. You can use the loan to buy a home anywhere in the United States or in certain U.S. territories.

How much you can borrow with a VA loan

There is no set maximum loan amount for a VA loan. Instead, the VA guarantees a portion of the loan — currently up to $1,092,500 in most parts of the country, though this amount changes yearly and is higher in some high-cost areas. Your lender will look at your income, credit, and debts to decide how much they will lend you, just as they would with any mortgage.

Because there is no down payment requirement, the amount you can borrow is limited mainly by what the lender thinks you can afford to repay. Lenders typically use debt-to-income ratios — the percentage of your monthly income that goes to debt payments — to make this decision. Most lenders want your total debt payments (including the new mortgage) to be no more than 41 to 50 percent of your gross monthly income, though this varies by lender.

The funding fee and other costs

The funding fee is a one-time charge that most VA loan borrowers pay. For a first-time VA home purchase with no down payment, the funding fee is 2.3 percent of the loan amount. If you put down 5 percent or more, it drops to 1.63 percent. If you put down 10 percent or more, it is 1.23 percent. If you are refinancing an existing loan into a VA loan, the funding fee is 0.55 percent.

You do not pay this fee upfront in cash. Instead, it gets added to your loan amount, so you pay it back over time as part of your monthly mortgage payment. Veterans with a service-connected disability rating of 0 percent or higher do not pay a funding fee at all.

Beyond the funding fee, you pay the same costs as any other homebuyer: property taxes, homeowners insurance, and possibly homeowners association fees if you buy in a community with an HOA. You may also pay for a home inspection, appraisal, and title search, though some of these costs may be negotiable with the seller.

Using a VA loan more than once

You can use your VA loan benefit more than once. After you pay off a VA loan, your may be able to access is restored and you can use it again. You can also use it while you still owe on a previous VA loan, though lenders may be less willing to lend if you already have a mortgage.

Some veterans have used their VA loan benefit multiple times — to buy a home, sell it years later, and then buy another home. Each time you use the benefit, you may pay a funding fee again, unless you are exempt.

Frequently Asked Questions

Do I need a down payment for a VA loan?

No. A VA loan requires zero down payment, which is one of its main advantages. You can buy a home and finance 100 percent of the purchase price, as long as the lender approves you for that amount based on your income and credit.

What is the funding fee and do I have to pay it?

The funding fee is a one-time charge, usually 1.23 to 2.3 percent of the loan amount, that goes to the VA to help offset the cost of the program. Most borrowers pay it, but veterans with a service-connected disability rating are exempt. The fee is added to your loan, not paid upfront in cash.

Can I use a VA loan to buy an investment property?

No. A VA loan can only be used to buy a home for your own use as a primary residence. You cannot use it to buy a rental property, vacation home, or investment property.

How do I get a Certificate of may be able to access?

You can request a Certificate of may be able to access online at VA.gov, by mail, or ask your lender to request it for you during the mortgage process. Most lenders handle this step as part of their process, so you may not need to do it yourself.

Can I use a VA loan if I am still on active duty?

Yes. If you have completed at least 90 days of active duty, you may be able to use a VA loan. You will need a Certificate of may be able to access to prove your service, which you can request through VA.gov or your lender.