What is a VA Loan?

A VA loan is one of the most powerful pathways to homeownership in the U.S.

A VA loan often comes with no down payment, no private mortgage insurance, and competitive rates compared with other loan types.

But eligibility is limited, and VA loans have several unique features that are important to keep in mind.

How VA Loans Work

A VA loan is a mortgage guarantee program backed by the U.S. Department of Veterans Affairs. Private lenders make the loan, while the VA guarantees a portion against default to reduce lender risk and improve borrower terms.

VA loans often come with zero down payment requirement and lower rates. The program’s mission is straightforward: expand affordable homeownership for eligible service members, veterans, and select spouses.

In practice, “loan guaranty” means the VA insures part of the loan for the lender. The VA does not directly fund mortgages, but its backing enables better pricing and flexible qualification standards.

VA Loan Benefits

VA loans are probably best known for their $0 down payment requirement, but that isn’t their only benefit.

VA loans generally have no down payment requirement if you have full entitlement. You might be required to make a down payment if you have partial entitlement, or if you’re getting a VA jumbo loan.

Other VA loan benefits include:

• No monthly private mortgage insurance (PMI), which can significantly lower your payment. VA loans instead have a one-time VA funding fee, but that can be rolled into your loan, and some qualifying veterans can have it waived.
• Competitive interest rates compared to many conventional options.
• Flexible underwriting, no prepayment penalties, and residual income rules that help safeguard your budget.
• VA loans are assumable, meaning a qualified buyer can take over the existing loan, even if they’re not a veteran, with lender and VA approval.

VA loans vs. other common loan types

Who Qualifies for VA Loans?

VA loans come with some of the best terms of any loan program, but eligibility is limited.

Eligible groups generally include:

• Active-duty service members
• Veterans
• National Guard and Reserve members
• Certain surviving spouses of service members who died in service or from a service-connected disability

Your Certificate of Eligibility (COE) is the VA’s official document confirming you qualify for the benefit and indicating your entitlement amount.

Typical service requirements include scenarios such as 90 consecutive days of active service during wartime, 181 days during peacetime, or 6 years in the Guard/Reserve; surviving spouses may also qualify in specific circumstances.

Beyond service eligibility, you’ll need to meet lender credit, income, and property guidelines. VA lending standards are often more flexible after events like bankruptcy or foreclosure, and lenders consider your residual income to help ensure affordability.

Types of VA Loans Available

VA loans come in flexible formats based on your needs. Here’s an overview of a few common VA loan types:

• VA purchase loan: Buy a primary residence with little to no down payment.
• VA renovation loan: Finance allowed repairs/improvements into your mortgage.
• VA new-construction loan: Build a qualifying primary home with VA oversight.
• VA cash-out refinance: Tap home equity and/or refinance a non-VA loan into a VA loan.

There’s also the VA IRRRL (Interest Rate Reduction Refinance Loan). Those are streamlined, affordable refinances.

You can use a VA-backed loan for many property types, including single-family homes, approved condos, some multi-unit properties if you reside in one of the units, manufactured homes, and certain new construction subject to VA and lender guidelines.

VA Loan Costs and Fees

A VA loan comes with three categories of costs:

• One-time VA funding fee: Generally 1.25%–3.3% depending on down payment, first vs. subsequent use, and service category. Veterans with qualifying service-connected disabilities are typically exempt. The fee can usually be rolled into your loan.
• Closing costs: Third-party fees, including appraisal, credit, title, and recording fees. Closing costs can also include prepaid taxes and insurance, and lender charges. Those are still required even with 0% down.
• Ongoing monthly costs: Principal and interest, property taxes, homeowners insurance (and HOA dues, where applicable). There’s no monthly PMI on VA loans.

The Bottom Line

A VA loan is a flexible and competitive loan option with limited availability. They’re backed by the Department of Veterans Affairs and typically have no down payment requirements, although that can change based on your entitlement. VA loans have no PMI requirements, but do require a one-time VA funding fee that can usually be financed. Some qualifying veterans, like those with service-related disabilities, can have the fee waived

Frequently asked questions

Who qualifies for a VA loan?

Eligible borrowers include active-duty service members, veterans, reservists/Guard, and certain surviving spouses. A COE from the VA confirms eligibility and entitlement.

What are the main benefits of a VA loan?

No down payment for most borrowers, no monthly PMI, competitive rates, and flexible qualification standards.

What is the VA funding fee and can it be waived?

It’s a one-time charge that helps fund the program; it’s commonly financed into the loan and is waived for many veterans with service-connected disabilities.

Are there loan limits for VA loans?

With full entitlement, there’s no VA-imposed loan limit, but lenders may set caps; limits can apply if you have partial entitlement.

Can VA loans be used for refinancing or renovations?

Yes. Options include cash-out and rate/term refinancing, as well as certain renovation financing under VA guidelines.