Edited by Samuel MountjoyWhat Is a VA Loan?
Quick Answer
A VA loan is a mortgage specifically for eligible service members and their families. They’re insured by the U.S. Department of Veterans Affairs (VA) and typically have lower interest rates and no down payment requirement.
VA loans are mortgages for eligible service members, veterans and their families. Backed by the U.S. Department of Veterans Affairs (VA), these low-cost home loans are available through private lenders and have some noteworthy perks. They typically have lower interest rates than conventional mortgages—and it's possible to close the deal with no down payment. That said, VA loans do come with fees and restrictions that are important to understand.
How Does a VA Loan Work?
Even though they're backed by the U.S. government, VA loans are issued by private financial institutions like banks and credit unions. Homebuyers apply through an approved mortgage lender, then the VA insures the loan behind the scenes. That means they'll cover a portion of the lender's losses if the borrower defaults on their home loan.
During the application process, the term "entitlement" is likely to come up. This is the amount the VA agrees to pay your lender if you're unable to repay your loan as promised.
| Loan Amount | Maximum Entitlement Amount |
|---|---|
| $144,000 or less | $36,000 |
| More than $144,000 | 25% of the loan amount |
A VA loan can only be used for a primary residence, which is the main home you'll live in for most of the year. That means you can't use this type of mortgage to buy a vacation home or investment property. You can also expect to pay a VA funding fee (more on this shortly). VA-approved lenders do have some discretion when it comes to approval criteria and can set their own interest rates. They might also charge additional fees.
Learn more: Compare Current VA Loan Rates
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Common Types of VA Loans
There are several types of VA loans, and each one is considered a government-backed mortgage.
- Home purchase loan: Can be used to buy or build a new home, or make improvements to your primary residence.
- Interest rate reduction refinance loan (IRRRL): Can be used to refinance an existing VA loan.
- VA-backed cash-out refinance loan: Works like a regular refinance loan, but you can borrow more than your current mortgage balance. With a cash-out refinance, you'll receive the difference as a lump-sum payment.
- Native American direct loan (NADL): Designed for eligible service members who are Native American or have a Native American spouse. This type of VA loan can be used to purchase or build a new home (or improve an existing home) on federal trust land. It can also be used to refinance an NADL. Either way, the VA will serve as your mortgage lender.
| VA Loan | When It Might Make Sense |
|---|---|
| Home purchase loan | You want to move into a new home or make upgrades to your current home |
| IRRRL | You already have a VA loan and want to lower your interest rate and make your monthly payment more affordable |
| VA-backed cash-out refinance loan | You need a lump sum of cash to cover a financial emergency, make home improvements or fund another financial goal |
| NADL | You or your spouse are Native American and looking to establish a primary residence (or make home improvements) on federal trust land, or you want to refinance an existing NADL |
Common VA Loan Fees
Understanding VA loan fees can help you decide if it's the right mortgage option for you. The VA puts a cap on certain fees but limits seller concessions to 4% of the home's reasonable value. That could limit how much the seller can put toward the buyer's closing costs.
Funding Fees
The funding fee is a one-time payment to help offset the costs associated with offering and insuring these low-cost loans. The fee is equal to a percentage of the loan amount, and the amount you pay will depend on the following factors:
- The type of VA loan you get
- Whether this is your first time using your VA loan benefit
- The size of your down payment
As of 2023, funding fees for first-time VA loan borrowers seeking a purchase loan range from 1.25% to 2.15%. For subsequent VA loans, that range rises to 1.25% to 3.3%. The larger your down payment, the lower your funding fee will be. Certain borrowers, like Purple Heart recipients and those with service-related disabilities, are exempt from paying the VA funding fee.
Origination Fees
VA loan lenders may also charge their own loan origination fee. This upfront fee covers the cost of reviewing your application and processing your mortgage. For VA loans, it typically amounts to 1% of the total loan amount.
Other Closing Costs
Mortgage closing costs, which can vary by lender, usually range anywhere from 2% to 5% of the sale price. On top of the VA loan funding fee and loan origination fee, closing costs can include:
- Real estate agent fees
- VA appraisal fee
- State and local taxes
- Loan discount points
- Title insurance
- Recording fee
Be alert: Some borrowers opt to include the loan origination fee and funding fee in the loan, which can reduce your closing costs. But, doing so will increase your monthly payment and add to the total cost of your mortgage.
VA Loan vs. Conventional Loan
Government-backed mortgages like VA loans work differently than conventional mortgages, which are not federally insured. Here's how they measure up to one another.
| VA Loan | Conventional Loan | |
|---|---|---|
| Who it's for | Eligible service members, veterans and their families | Any borrower who meets the lender's eligibility criteria |
| Minimum down payment | 0% | 3% |
| Credit score requirements | Varies by lender but typically ranges from 620 to 670; borrowers with lower credit may still qualify with a larger down payment or a higher interest rate | Varies by lender but typically requires a score of 620 or higher |
| Interest rates | Typically lower than conventional loans; as of January 2026, the average rate for a 30-year fixed-rate VA mortgage was 5.73%** | Often higher than VA loans; as of January 2026, the average rate for a conventional 30-year fixed-rate mortgage was 6.06%** |
| Loan limits | No limit, but you'll have to meet the lender's eligibility requirement and may have to make a down payment if your full entitlement isn't available to you | Up to $832,750 for a single-family home in most U.S. counties |
*Source: Federal Reserve
**Source: Curinos LLC
Pros and Cons of a VA Loan
Like any type of mortgage, VA loans have benefits and drawbacks. Below are some important things to consider before moving forward.
Pros
-
Doesn't require a down payment: This can make homeownership more accessible for first-time buyers. As of December 2025, the National Association of Realtors (NAR) put the median price for a single-family home in the U.S. at $409,500. With a conventional mortgage of that amount that requires a 3% down payment, you'd need to come up with $12,285.
-
Lower interest rates: Since VA loans are insured by the federal government, you'll likely secure a lower mortgage rate than you'd get with a conventional loan. A lower rate means lower monthly payments. You'll also save money on interest over the long haul.
-
No mortgage insurance requirement: With a conventional loan, you'll likely pay for private mortgage insurance (PMI) if your down payment is less than 20%. VA loans, on the other hand, do not require mortgage insurance.
Cons
-
Funding fees: Again, the amount you'll pay depends on the type of VA loan you get, whether you choose to make a down payment and whether it's your first time using a VA loan. Let's say it's your second VA loan and you're putting down less than 5% on a $350,000 home; your funding fee would be 3.3% (or $11,550).
-
Minimal home equity: Making a 0% down payment means that you'll start off having no equity in your home. As a result, it will likely take longer to build wealth because you'll have more debt and less money accumulated in assets. And if your home loses value, you could end up owing more than it's worth.
-
Minimum property requirements (MPRs): With a VA loan, the home must be appraised and meet certain guidelines. This is to ensure that it's structurally sound and in good overall condition. If not, the application may be denied.
VA Loan Requirements
To qualify for a VA loan, you'll need to meet certain requirements set forth by the VA and the mortgage lender issuing the loan.
Military Service Requirements
To check off this box, you'll need a Certificate of Eligibility (COE). This certifies that you meet the service requirements for a VA loan. You must be an eligible veteran, active-duty service member, national guard member or Reserve member.
Lender and Financial Requirements
You can expect the lender to verify your employment, income, credit score and debt-to-income ratio (DTI) before approving you. Your DTI shows the amount of your gross monthly income that's going toward debt payments. For a VA loan, your DTI will likely need to be 41% or less. The minimum credit score is typically 620 to 670.
Property and Occupancy Requirements
Eligible properties for a VA purchase loan include single-family homes with up to four units, VA-approved condos and manufactured homes or lots. Just don't forget about those minimum property requirements mentioned earlier. The home must also be used as your primary residence, though exceptions apply for deployed and active-duty service members.
Learn more: VA Loan Requirements
How to Apply for a VA Home Loan
The application process for a VA loan isn't all that different from applying for a conventional loan, though there are some key distinctions. If you meet the requirements listed above, you can move on to these steps.
1. Get Proof of Eligibility
Your lender will want to verify your COE before moving forward. You can do this in one of the following ways:
- Request it online. This can be done through the U.S. Department of Veterans Affairs website.
- Go through your lender. They may be able to accept the required documents and generate your COE for you.
- Mail in your request. You can fill out VA Form 26-1880 and mail it into the loan center in your region.
2. Find Lenders
Not all lenders offer VA loans. You can begin your search by locating your nearest VA regional office. You can also search online for local VA-approved banks, credit unions and online lenders. It's wise to shop around and compare rates and fees from multiple lenders before making a decision.
3. Get Preapproved
Getting preapproved for a mortgage can clarify your borrowing power and show sellers that you're ready to make a legitimate offer. The process involves:
- Submitting financial information like proof of employment, income, assets and debts
- Disclosing whether you plan on making a down payment (and if so, how much)
- Consenting to a credit check
If all goes well, you'll receive a preapproval letter with your expected loan amount. This will likely be valid for 30 to 90 days.
4. Start Looking for Eligible Properties
After obtaining your COE and getting preapproved, you can begin looking at properties that fit your budget. A real estate agent can help you find listings and even make an offer and negotiate with the seller on your behalf. If your offer is accepted, the lender will send a VA-approved appraiser to estimate the home's value and ensure it meets the VA's minimum property requirements. You might also schedule a home inspection to get a more thorough look at the property.
5. Apply
The final step is to submit your mortgage application, which is similar to applying for preapproval. You'll want to have all supporting financial documents on hand—and respond quickly if your lender has any follow-up questions. That can help avoid delays and keep the process moving. If you're approved, you'll finalize the paperwork and close on your home loan.
Frequently Asked Questions
The Bottom Line
VA loans have strict eligibility requirements and come with funding fees, but it can be a game changer for borrowers who can't afford a down payment. Like other types of home loans, having strong credit can make it easier to qualify—and could get you a lower interest rate. You can check your FICO® ScoreΘ and credit report for free from Experian.
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About the author
Marianne Hayes
Marianne Hayes is a longtime freelance writer who's been covering personal finance for nearly a decade. She specializes in everything from debt management and budgeting to investing and saving. Marianne has written for CNBC, Redbook, Cosmopolitan, Good Housekeeping and more.
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