VA Loans

The Department of Veterans Affairs, commonly known as the VA, backs a mortgage program designed to help eligible veterans, active-duty service members, and certain surviving spouses purchase homes. This lesson introduces the general features of VA loans.

What a VA loan is

Like FHA loans, the VA does not typically lend money directly in most cases; it guarantees a portion of the loan, encouraging private lenders to offer benefits such as no down payment options to qualifying borrowers.

Who may be eligible

Eligibility for VA loans generally depends on factors such as length and character of service, and can extend to certain surviving spouses of service members. Because eligibility rules involve specific service requirements that can vary by individual circumstances, anyone interested should verify their status directly with the VA rather than assuming eligibility either way.

Common benefits associated with VA loans

• Down payment: eligible borrowers may be able to finance a home with no down payment, though this depends on the loan amount, lender, and other factors.
• Mortgage insurance: VA loans typically do not require the ongoing monthly mortgage insurance associated with many conventional and FHA loans.
• Funding fee: instead of ongoing mortgage insurance, VA loans often include a one-time funding fee, which can sometimes be financed into the loan; certain borrowers may be exempt from this fee.
• Interest rates: VA loans have sometimes offered competitive interest rates, though actual rates depend on market conditions, the lender, and the borrower's profile.

The certificate of eligibility

Obtaining a COE early in the process can help clarify eligibility before house hunting begins.

Costs that may still apply

While VA loans can reduce or eliminate certain costs, borrowers should still expect other typical homeownership costs, such as property taxes, homeowners insurance, and standard closing costs, some of which may be limited or negotiated differently under VA guidelines. It is also worth noting that VA loans, like other loan types, still require lenders to evaluate income, credit, and other factors as part of underwriting.

A common mistake

Because eligibility rules, funding fee amounts, and program details are set by the VA and can change over time, always confirm current information through the VA or a knowledgeable lender.