Complete VA Loan Guide
VA loans are one of the most powerful homebuying benefits available to those who have served. This guide covers everything from eligibility to closing.
What Is a VA Loan?
A VA loan is a mortgage backed by the U.S. Department of Veterans Affairs. The VA does not lend money directly. Instead, it guarantees a portion of the loan made by a private lender like American Financial Network. This guarantee allows lenders to offer exceptionally favorable terms, including zero down payment and no private mortgage insurance.
VA loans were created as part of the Servicemembers Readjustment Act of 1944 (the GI Bill) to help returning World War II veterans purchase homes. Since then, more than 25 million VA loans have been made, and the program continues to be one of the most significant benefits available to military service members and their families.
The program can be used for purchasing a primary residence, refinancing an existing mortgage, or even building a new home in some cases. VA loans are available for single-family homes, condominiums (VA-approved), manufactured homes, and multi-unit properties up to four units, as long as you occupy one unit as your primary residence.
Who Is Eligible?
VA loan eligibility is based on your military service history. You may be eligible if you meet one of the following criteria:
Active-Duty Service Members
Currently serving with at least 90 continuous days of active service. You can use your VA loan benefit while still serving.
Veterans
Served at least 90 days of active duty during wartime, or 181 continuous days during peacetime. Post-September 11, 2001 veterans need 90 days of active service.
National Guard and Reserve Members
Eligible after 6 years of service in the National Guard or Reserves, or 90 days of active-duty service under Title 10 orders.
Surviving Spouses
Un-remarried surviving spouses of veterans who died in service or from a service-connected disability. Some remarried surviving spouses may also qualify.
To use a VA loan, you will need a Certificate of Eligibility (COE), which verifies your service history. Your lender can often obtain this electronically in minutes through the VA's Web LGY system. You can also request it through eBenefits or by submitting VA Form 26-1880.
Key Benefits
No Down Payment
The most significant benefit. VA loans allow you to finance 100 percent of the home purchase price. On a $500,000 home, that means $0 down versus $25,000 for a 5 percent conventional down payment or $17,500 for an FHA loan. This benefit alone makes homeownership accessible years earlier for many veterans.
No Private Mortgage Insurance
Unlike FHA and conventional loans with less than 20 percent down, VA loans never require private mortgage insurance. This saves borrowers $100 to $400 or more per month depending on the loan amount, adding up to tens of thousands of dollars over the life of the loan.
Competitive Interest Rates
Because the VA guarantees a portion of the loan, lenders take on less risk and can offer rates that are typically 0.25 to 0.5 percent lower than conventional rates. On a $400,000 loan, even a 0.25 percent rate reduction saves over $20,000 in interest over 30 years.
Flexible Credit Requirements
The VA does not set a minimum credit score, though most lenders require a score of 580 to 620. VA guidelines are more forgiving of past credit issues, including bankruptcy (typically eligible 2 years after Chapter 7) and foreclosure (2 years after a VA foreclosure).
Limited Closing Costs
The VA limits the closing costs that lenders can charge to VA borrowers. Additionally, sellers can contribute up to 4 percent of the purchase price toward the buyer closing costs and prepaid items, which is more generous than conventional loan limits.
How to Apply for a VA Loan
Obtain your Certificate of Eligibility
Your lender can pull this electronically in most cases. Alternatively, apply through the VA eBenefits portal or submit VA Form 26-1880 by mail.
Get pre-approved
Submit your financial documentation including pay stubs, W-2s, tax returns, and bank statements. Pre-approval shows sellers you are a serious, qualified buyer.
Find your home
Work with a real estate agent who understands VA transactions. The property must meet VA Minimum Property Requirements (MPRs) and be your primary residence.
VA appraisal
The VA assigns an independent appraiser to determine the home value and ensure it meets MPRs. This protects you from overpaying and ensures the home is safe and habitable.
Underwriting and closing
Your loan goes through final underwriting. Once approved, you attend closing, sign your documents, and receive the keys to your new home.
VA Funding Fee
The VA funding fee is a one-time payment that helps sustain the VA loan program for future generations of service members. The fee varies based on your service category, down payment amount, and whether it is your first VA loan.
| Scenario | First Use | Subsequent Use |
|---|---|---|
| 0% down | 2.15% | 3.3% |
| 5% or more down | 1.5% | 1.5% |
| 10% or more down | 1.25% | 1.25% |
The funding fee can be financed into your loan amount, meaning you do not need to pay it out of pocket at closing. Veterans receiving VA disability compensation, Purple Heart recipients on active duty, and surviving spouses are exempt from the funding fee entirely.
Frequently Asked Questions
Can I use my VA loan benefit more than once?
Yes. Your VA loan benefit is not a one-time use. You can use it multiple times throughout your life. If you have paid off a previous VA loan or sold the home, your full entitlement is restored. You can even have two VA loans at the same time in certain circumstances.
Is there a VA loan limit?
For borrowers with full entitlement (no active VA loans or previous VA loan defaults), there is no loan limit. You can borrow as much as a lender will approve based on your income and credit. Borrowers with reduced entitlement may face county-level limits based on conforming loan limits.
Can I use a VA loan for investment property?
VA loans are for primary residences only. However, you can purchase a multi-unit property (up to 4 units), live in one unit, and rent out the others. The rental income can even help you qualify for the loan.
How long does the VA loan process take?
A typical VA purchase takes 30 to 45 days from contract to closing. The VA appraisal usually takes 7 to 14 days. Working with an experienced VA lender can help ensure a smooth, timely process.
Can I refinance my VA loan?
Yes. The VA offers two refinance options: the Interest Rate Reduction Refinance Loan (IRRRL), also called a VA Streamline, which simplifies refinancing to a lower rate, and the VA Cash-Out Refinance, which lets you tap your home equity.
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