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Military service to your country is rewarded with an exclusive benefit to foster homeownership. A VA loan is unlike any other mortgage on the market, offering a home loan with no down payment , limited closing costs, and no private mortgage insurance. VA loans are offered only to those who have served in the military and to eligible surviving spouses, but if you qualify, you reap serious benefits.
What is a VA home loan?
VA loans are administered by the Department of Veterans Affairs, which guarantees a portion of the loan. But they are issued by a wide array of VA-approved mortgage lenders , including banks, credit unions, and mortgage providers. The Department of Veterans Affairs guarantee gives lenders greater flexibility in structuring the loan terms.
Current service members, veterans, and eligible surviving spouses may use a VA loan to finance the purchase of a single-family home, condominium, multi-unit property, manufactured home, or new construction. As of August 2025, VA loan applications are increasing. The Mortgage Bankers Association reported that VA loans accounted for 14.2% of all mortgage applications for the week ending Aug. 8.
Learn more: 12 popular types of houses
How a VA loan works
Around 90% of VA loan borrowers don’t make a down payment . How? Well, the VA doesn't require any money down, but lenders can add loan requirements to manage their credit risk. It's the same with credit scores: The VA doesn't set a minimum qualifying credit score for a home loan, but lenders often do.
Yahoo Finance Tip:These "lender overlays" — qualifying requirements beyond those specified by a guarantor like the VA — are a primary reason for borrowers to shop with multiple mortgage lenders . According to the CFPB, borrowers could save $100 a month or more by shopping for the best mortgage deal.
Generally, the benefits of a VA loan for a borrower with full entitlement include:
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No down payment
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No loan limit
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Lower closing costs
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No private mortgage insurance (PMI)
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Ability to purchase and fund repairs that are completed after closing
Read more:
VA loan interest rates
While mortgage rates change daily, VA home loans tend to have lower interest rates than conventional mortgages. For example, according to Mortgage News Daily, the average interest rate on a 30-year fixed-rate VA loan on Aug. 19, 2025, was 6.2%, while the rate on a 30-year conventional loan was 6.6%. Your rate may be higher or lower depending on your creditworthiness, lender, and finances.
Keep learning: How to earn the lowest mortgage rates
The VA funding fee
One cost unique to a VA loan that shouldn't be overlooked is the VA funding fee . It is not insignificant and can blindside a borrower.
The VA funding fee is typically 1.25% to 2.15% of the loan amount for the first-time use of a purchase loan and 1.25% to 3.3% for subsequent uses. It can be paid in cash at closing, financed as part of the loan, or paid by the lender or home seller as a concession.
There can be exemptions from the funding fee payment , including for certain veterans with a service-connected disability and some unremarried surviving spouses of veterans.
How to qualify for a VA loan
Lenders may stipulate how much you can borrow, but the VA does not specify loan limits for borrowers with a full entitlement. The main rule is that you can’t borrow more than the appraised value of the home you’re buying or the purchase price (whichever is lower). And while there is no minimum income requirement, the VA needs proof that you will have "income remaining after paying your mortgage and other financial obligations."
The home being financed must be your primary residence, and you must fall into one of the following categories:
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An active-duty service member who has served at least 90 continuous days
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A veteran of the armed forces, including Reserve and National Guard members; the minimum active-duty service requirements depend on when you served
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An eligible spouse
There are quite a few qualifiers to the above standards. Here is a complete list of service requirements . Even if it seems you don't meet the minimum service requirements, examine the details of active-service and veteran qualifications.
Particular circumstances of a discharge can also qualify (or disqualify) you for a VA loan.
Certificate of Eligibility (COE)
You will need to provide proof of your eligibility for a VA mortgage with a Certificate of Eligibility . Approved VA lenders will have access to an online tool that can provide the information within minutes.
You can also get a COE online at VA.gov or submit a VA Form 26-1880 via mail.
Lender loan requirements
Specific loan-eligibility requirements vary by lender, but generally, VA loan borrowers must do the following:
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Meet a minimum credit score requirement.The VA does not set this, and it varies by lender. While a FICO of 620 is often mentioned as the preferred entry-level credit score, Yahoo Finance found minimum credit scores at a sampling of major VA lenders to be 550, 580, and 620.
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Fall within certain debt-to-income limits.The VA also doesn't mandate a maximum debt-to-income ratio , but lenders often look for a DTI ratio of less than 41%.
What makes someone a qualifying spouse?
Certain military spouses are able to get a COE and qualify for a VA loan. These include:
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Spouses who are eligible for or currently receiving certain kinds of VA Dependency and Indemnity Compensation
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Spouses of active-duty service members who are prisoners of war or missing in action
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Spouses of veterans who died while in service or from service-connected disabilities (and who did not remarry before age 57 or before Dec. 16, 2003)
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Spouses of veterans who were totally disabled and died later (in some cases, the disability does not need to have caused the death)
In addition to a COE, you may need your spouse’s separation papers, a copy of your marriage license, or a death certificate to qualify for a VA loan.
Pros and cons of VA loans
Like any type of mortgage, VA loans have their pros and cons . Here are some important ones to consider:
Pros
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No down payment required
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Option to use an adjustable-rate mortgage
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No PMI
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Lower interest rates than other loan options
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Closing costs are capped
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VA loans are assumable
Cons
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You'll likely owe a VA funding fee
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Loans are limited to those who meet VA qualification requirements
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Properties must meet minimum safety requirements
For most borrowers, the biggest upside of a VA loan is that it doesn’t require a down payment. This can lower the barrier to homeownership considerably and help many veterans and active-duty military members buy a home sooner than would have been possible with other loan programs.
VA loans require no private mortgage insurance (PMI), have limited closing costs, and boast low interest rates. They are also a type of assumable loan . This means that when you sell your home, the next owner can take over your VA loan — including its favorable rate and terms. This may make it easier to sell your home when the time comes.
The downside to VA loans is that only a small segment of the population can qualify for them, as they have very strict military service requirements. They also come with funding fees that can add to your total costs as a borrower, and a home must meet the VA’s minimum property standards in order to qualify.
Dig deeper: Is now a good time to get a VA loan?
Options for VA loan refinancing
VA cash-out refinance
If you already have a VA loan or want to convert your conventional loan to a VA mortgage, the VA cash-out refinance program could be for you. With this refinancing option, you can either keep or convert to a VA loan and pull equity out of your home in the form of cash.
With a VA cash-out refi, you’ll still be subject to the VA funding fee. If your original mortgage is a VA loan, you’ll pay a higher VA funding fee — 3.3%. If you convert a conventional loan to a VA mortgage and haven’t previously used your VA loan benefit, your funding fee is 2.15%.
The one catch to be aware of with the VA’s cash-out refinance option is that it’s only available for primary residences that are currently occupied.
VA IRRRL
The VA Interest Rate Reduction Refinance Loan — or VA IRRRL (“earl”) for short — skips the cash-out and simply refinances your existing VA loan into a new one with a lower interest rate. It’s also called a VA streamline refinance.
These refinance loans skip a lot of the hoops involved in other refinance loans. With the VA streamline refinance, you’ll enjoy no credit check, income verification, or home appraisal. There is a VA funding fee, but it’s only 0.50% of your loan, and you can roll the funding fee and closing costs into your new mortgage. Many borrowers see their loans closed in as little as 10 days.
To qualify for a VA streamline refinance, you must have made six months of consecutive payments on your original VA loan and waited at least 210 days from making your first VA mortgage payment. You’ll also need to be current on your mortgage payments.
A big plus for the VA IRRRL refinance option is that you can use it to refinance primary and secondary residences. The home must be your primary residence initially, but once you’ve closed on the VA IRRRL, you’re free to use it as a second home and even rent out the space.
Read more: The best mortgage refinance lenders
VA loan FAQs
What is a VA loan, and how does it work?
A VA loan is a mortgage backed by the U.S. Department of Veterans Affairs that’s available to qualifying military servicemembers, veterans, and some surviving spouses. VA loan borrowers enjoy many perks, including zero down payments, no private mortgage insurance (PMI), and lower interest rates than conventional mortgages . First-time VA loan borrowers must pay a VA funding fee that ranges from 1.25% to 2.15% of the loan value. However, borrowers have the option of rolling the funding fee and other closing costs into their mortgage to enjoy a true “zero-down” mortgage.
What is the downside of a VA loan?
The main disadvantages of VA loans are their strict eligibility requirements and the VA funding fee. These loans are only available to qualifying service members, veterans, and some surviving spouses who can present the required Certificate of Eligibility (COE) issued by the VA. Most VA borrowers must also pay the VA funding fee, which ranges from 1.25% to 2.15% of the total loan for a first-time VA loan borrower, though some veterans may qualify for a funding fee waiver.
What is the difference between a VA loan and a regular loan?
A VA loan is a mortgage loan reserved just for military service members, veterans, and some surviving military spouses. These loans cannot be used by people who don’t fall into these categories.
Does a VA loan need a down payment?
No, one of the main perks of VA loans is that they do not require a down payment for those who have their full entitlement. This can save borrowers thousands of dollars on their home purchases. About 90% of VA loan borrowers do not make a down payment.
What is the 1% rule on a VA loan?
The 1% rule on a VA loan states that a lender may only charge a VA borrower a maximum mortgage origination fee of 1% of the loan’s value. For VA IRRRL borrowers, the origination fee can only be assessed based on the balance of the existing VA loan.
Laura Grace Tarpley edited this article.
