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What is a VA Loan?
What you'll learn: The different types of VA loans, VA home loan benefits, eligibility, and more.
EXPECTED READ TIME: 5 MINUTES
December 15, 2020 | Updated January 26, 2024
Created more than 70 years ago, the U.S. Department of Veterans Affairs (VA) Home Loan Guaranty Program was designed to help veterans, servicemembers, and surviving spouses achieve the dream of homeownership. Provided by private lenders, such as banks and credit unions, VA home loans offer borrowers competitive rates with often little to no down payment required.
In general, VA loans offer a number of financial benefits that place the prospect of buying a home into the hands of more people who otherwise may not have the opportunity.
VA loan guaranty
All VA loans are government-backed mortgages. This means that the VA (a government entity) agrees to reimburse approved lenders in the event of loss due to a foreclosure. This VA loan guaranty takes the place of a traditional down payment. Other housing-related programs help you buy, build, repair, retain, or adapt a home for your needs and occupancy. And that’s not where the benefits of this type of home loan end.
Veterans loan benefits
If you qualify, there is a long list of benefits that make VA loans a great alternative to a conventional loan. VA-backed purchase loans typically offer the following:
- 0% down payment
- Competitive interest rates
- Flexible credit requirements (varies depending on your lender’s credit minimum)
- Limits on closing costs
- No private mortgage insurance (there is a VA funding fee)
- Lifetime benefits
- Refinance options
Types of VA loans
The VA home loan program offers a variety of different loan options that help borrowers buy, build, and improve or refinance a home. If you are unsure of which VA loan type is best suited for your needs, be sure to talk through your options with a VA-approved lender or home loan expert.
- VA Home Purchase Loan: typical mortgage loan that is backed by the VA.
- VA Jumbo Loan: a VA loan that exceeds the conforming loan limits.
- VA Renovation Loan: used for the purchase of a home, in addition to the cost to renovate the property.
- VA Cash-Out Refinance: refinance a non-VA or VA loan for the purpose of accessing equity in the home or changing your mortgage terms including lowering your rate.
- VA Interest Rate Reduction Refinance Loan (IRRRL): also known as a VA streamline refinance, available for borrowers who have previously used a VA loan and want to refinance to lower monthly payments or interest rate. Requires less documentation and a lower VA funding fee.
VA loan eligibility
There are general guidelines for VA loan eligibility, but they vary slightly based on whether you are a veteran, on active duty, serve or have served in the National Guard or Reserve. Here are a few basic guidelines to be aware of:
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Veterans who served after August 2, 1990 are eligible if you served for 24 continuous months.
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Current active duty servicemembers are eligible after 90 continuous days of service.
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National Guard members and Reservists are eligible after 90 continuous days of service.
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A surviving spouse of a veteran or the spouse of a veteran who is missing in action or being held as a prisoner of war (POW) may also qualify. Review eligibility requirements on the U.S. Department of Veteran Affairs website.
In addition to meeting the above guidelines, you’ll have to obtain a Certificate of Eligibility (COE).This document will inform your VA-approved lender that you meet the necessary VA eligibility requirements to obtain a VA loan.
VA funding fee
The VA funding fee is a one-time payment that lowers the overall cost of a loan for U.S. taxpayers. It can be paid upfront or rolled into the total cost of your VA loan. Despite the fee, you’ll find that the benefits of a VA loan far outweigh its cost.
How to use a VA loan
In general, you can use a VA-backed purchase loan to:
- Buy a single-family home
- Build a new home
- Buy a home and improve it
- Buy a condo (within a VA-approved project)
- Buy your first home
- Reuse your VA benefit to sell or refinance the home you purchased using a VA loan
If you are interested in using a VA home loan to fulfill your own dream of homeownership, it is important to do your research and speak with the experts. Discussing your options with a trusted lender will help you determine the best type of mortgage for your unique situation.
SIMILAR ARTICLES
Mortgage Calculator - Know Your Options
Use PenFed's free mortgage calculator and determine your monthly payment, including principal and interest. Calculate conventional, VA, and jumbo home loans.
Everything You Need to Know About VA Loan Rates
If you're shopping for a VA loan, you may have questions about VA rates. Find out who sets the rates, how your rate is determined, and the best time to lock in your interest rate.
VA Loan Eligibility: Step by Step
TLearn what you need to do to qualify for a VA home loan. From finding a VA lender, getting your COE, prequalifying for a mortgage, and requirements for the property.
Understanding Benefits of VA Loans
If you're wondering, are VA loans worth it? Read on to discover what the benefits are of a VA loan. We'll let you know why VA loans can't be beaten..
Home Buying Steps
Mortgage Products
Disclosures
1Conventional Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.0 discount point, which equals 1.0 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 75%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
2FHA Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.0 discount point, which equals 1.0 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 96.5%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
3VA Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.125 discount point, which equals 1.125 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $450,000; loan-to-value ratio of 95%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of $995.
4Jumbo Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.25 discount point, which equals 1.25 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, non-conforming, fixed-rate loan. Loan amount of $1,009,000; loan-to-value ratio of 70%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
Fixed Rate Advance Lock-In You may lock in an Annual Percentage Rate for Advances during the Advance Period. During your Advance Period, you may choose to have three separate Fixed Rate Advances locked in at any one time, with a maximum of two new Fixed Rate Advances per calendar year. Each Fixed Rate Advance must equal or exceed Ten Thousand Dollars ($10,000.00) and you may not request a Fixed Rate Advance that would cause the amount you owe to exceed your Credit Limit. The only term option for your Fixed Rate Advance is 240 months (“Fixed Rate Advance Term”). However, the term of your Fixed Rate Advance cannot exceed your Repayment Period.
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