VA Loan Requirements: VA Loans Explained

What are VA Loans?

VA loans are a type of mortgage loan for active and retired military members, including qualifying reserve members, and they can also be used by surviving spouses. VA loans come with many features that make them appealing to homebuyers. One is that they don’t require a down payment. Another is that they don’t require mortgage insurance. Because VA loans are guaranteed by the U.S. government, private lenders are able to offer lower rates than they would with many other home loans.

VA Loan Requirements

If you’re hoping to qualify for a VA loan, the full list of VA home loan requirements will be important to you.

The U.S. Department of Veteran Affairs determines whether a service member qualifies for the VA home loan. However, Chapter 7 of the M26-1 Guaranteed Loan Processing Manual goes into extensive detail about who does and does not qualify. You can also check out the VA’s Eligibility for VA Home Loan Programs article.

Here are a few quick bullet points:

•  For veterans: The length of service required depends on when you served.

•  For current service members: You must have served at least 90 continuous days.

•  For reserve members:

◦  6 years in the Selected Reserve, or

◦  At least 90 days of active duty service

Also, in addition to meeting VA loan eligibility requirements as an applicant, the home you purchase must also meet certain standards. There are a lot of specifications a home must meet or exceed, but in short, it needs to be safe and sound to live in.

You can read more about the qualifications a home must meet in Chapter 12 of the VA Loan Property Requirements.

VA Loan Limits

Borrowers eligible to receive a VA home loan no longer have any home loan limits if they have full entitlement. (Full entitlement means that the VA will pay lenders up to 25% of the loan amount should you default on the loan.) There used to be limits on how much of the loan the VA would guarantee over $144,000, but that changed with the Blue Water Navy Vietnam Act of 2019. Now, VA loans can even be a jumbo loan if you need them to be.

However, one thing to remember is that, even though the VA doesn’t place limits on how much qualified buyers can borrow with a VA home loan, your personal credit score, income, and debt to income ratio determine how much a private lender is willing to loan to you.

The cost of living in your area is another thing to consider. If you’re near retirement, you may want to research the most affordable places in the U.S. before you buy your next home, as well as the average monthly expenses for one person.

Recommended: Cost of Living in the U.S. by State

How to Qualify for a VA Loan?

The first step in getting a VA loan is to seek a certificate of eligibility (COE) from the VA, indicating that you have met the VA home loan requirements noted above. Once you have a COE, provide it to your lender during the application process.

Keep in mind that you still need to have a strong credit score, income, and a low debt-to-income ratio.

Currently, the VA doesn’t have a credit score requirement, but the lender you choose to work with may have their own eligibility requirements you’ll have to meet.

Types of VA Loans

The Department of Veterans Affairs offers two types of purchase VA loans: the VA-backed purchase loan and the Native American Direct Loan Program. Let’s break down the difference between them:

How a VA Loan Works

With a VA-backed home loan, the government guarantees the loan when the lender uses the VA’s qualification rules and terms. That makes lenders more likely to offer the loan since they’re guaranteed for at least a portion of the principal. Once you qualify, a VA home loan works much the same way as other home loans. You go through the mortgage preapproval process, make an offer, finalize the mortgage, and close on a house. Then you make monthly payments until the home is paid off.

How a VA Direct Home Loan Works

Called the Native American Direct Loan Program, this loan is designed to promote homeownership on federal trust land (usually reservations). In this case, you get a mortgage directly through the Department of Veteran Affairs vs. from a private lender. If you’re wondering how do you qualify for a VA loan of this type, it probably won’t surprise you to hear that this program is reserved for Native American veterans or a Native American person whose spouse is a veteran.

VA Loan Terms

You can get a VA loan with the same loan terms as you would any other mortgage, which allows you to choose from a 15-, 20-, or 30-year term. Just be mindful that with longer loan terms you’ll have lower monthly payments but will pay more in interest over the life of the loan. For shorter loan terms, the opposite is true — less in interest but higher monthly payments.

How Is a VA Loan Calculated?

Like any other mortgage, your monthly principal and interest payment is calculated based on the home purchase price, down payment, and interest rate. You may also roll your funding fee into the loan amount, which will make your payments slightly higher.

In addition to your principal and interest, your monthly payment will also include your homeowners insurance premiums, property taxes (unless you’re exempt), and any homeowners association fees.

How Much Can You Borrow With a VA Loan?

VA loans don’t have limits on the amount you can borrow. Because the U.S. government secures a large percentage of the loan, lenders consider VA loans less of a risk than others. As long as you can qualify for the loan and make the monthly payments, there’s no limit to the amount of house you can buy with a VA loan.

How to Apply for a VA Loan?

VA loan requirements mandate that applicants first meet service requirements. If you think you qualify, your next step is to obtain a certificate of eligibility.

Once you have your COE, you’ll need to find a VA-approved lender. The U.S. government secures VA loans, but it doesn’t disburse them (with the exception of the Native American Direct loans). So once you find a lender and are approved for a mortgage, it’s business as usual.

However, the home will need to go through a VA appraisal, and you have to pay the VA funding fee at closing.

Pros and Cons of an VA Loan

There are several VA loan benefits to consider, but there are some drawbacks as well. Here are some things to keep in mind:

Additional Benefits for Disabled Veterans

Veterans with service-related disabilities may qualify for a Specially Adapted Housing grant that allows you to buy, build, or change your home to help you live more independently. You may also qualify to have the VA funding fee waived.

In some locales, you may qualify for a property tax exemption as a disabled veteran. This varies in each state and county, so it’s worth checking during your home search.

Who Should Get a VA Loan

VA loan eligibility requirements can be difficult to meet, but if you qualify for one, you should definitely put it on your short list. If you’re serving, or previously served in one of the United States’ military branches, you may save the most money by using a VA loan.

How to Use a VA Loan

Once you’re approved for a VA loan, you use it the same as you would any mortgage. You’ll pay closing costs, the one-time VA funding fee, and your down payment (if you choose). From there, simply make your monthly payments to your lender until the loan matures, you sell, or you choose to refinance.

VA Loan Examples

If you buy a $300,000 house, and you make a down payment of 5%, your down payment amount would be $15,000. Your one-time funding fee would be $6,128 (based on the rates listed below).

If you made a zero down payment on that same $300,000 house, the funding fee would be $6,450.

Lastly, if you made a 10% down payment, your down payment would be $30,000, and your funding fee would be $3,375.

To determine how much a VA loan will cost you, use a VA loan calculator.

How Much Does It Cost to Get a VA Loan?

Apart from closing costs and appraisal fees, the cost of a VA loan largely depends on the size of your down payment, if you make one. This determines the size of the VA funding fee, which helps the U.S. government secure VA loans.

Here’s the fee structure:

	Down payment amount	Funding fee (based on loan amount)
First time VA loan	Less than 5%	2.15%
	5% or more	1.50%
	10% or more	1.25%
After first time	Less than 5%	3.30%
	5% or more	1.50%
	10% or more	1.25%

How to Find the Best VA Loan Rates

To find the best VA loan rates, it’s always a good idea to apply to a few different lenders. If you’re buying your first home, this is one of the key lessons to learn: Not every lender is able to offer the same rates as others. It’s very possible to get a better rate if you shop around.

What Are VA Loan Rates Expected to Do in 2025?

While there’s no way to predict the future trajectory of mortgage rates, some industry experts anticipate a drop. Freddie Mac, for instance, forecasts a gradual decline in rates into 2025.

VA Loans vs Conventional Loans vs FHA Loans

VA loans don’t require a down payment, nor do they require any type of mortgage insurance.

Conventional loans, on the other hand, typically require a 3% down payment for first-time homebuyers, while FHA loans require 3.5% down payment.

Private mortgage insurance (PMI) is required on conventional loans until 20% equity is reached. For FHA loans, a mortgage insurance premium (MIP) is required for the life of the loan unless you make a down payment of 10% or more. If you do, then it’s removed after 11 years.

The only unusual fee you have to pay with a VA loan is the VA funding fee.

Alternatives to a VA Loan

If a VA loan is appealing to you because of the zero down payment option but doesn’t suit you for other reasons, you may sidestep having to come up with a down payment by qualifying for a down payment assistance program. If you qualify as a first-time homebuyer, you may be eligible to receive aid in the form of a grant, low interest loan, or a forgivable loan.

The Takeaway

For those who can qualify for a VA loan due to military service, there are many advantages to financing your home purchase in this way. VA loans don’t require a down payment and there are no limits to the amount of the loan, as long as your financial situation can accommodate the payments. There is a one-time VA funding fee at closing, but overall, VA loans have many benefits and are a strong option for anyone who qualifies.

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