VA loans for veterans
VA loans are one of the nicer perks of military service, one that stays with your entire life, long after you've left the service. And they're not just loans for veterans – active-duty personnel can qualify as well, if they've been in the service long enough, as can some surviving spouses and those employed in certain national security branches of the government.
For eligible borrowers, VA loans not only allow you to get a mortgage with no money down, they also offer mortgage rates that can be significantly lower than on comparable conventional home loans, and fairly accommodating credit standards as well.
VA loans are guaranteed by the Department of Veterans Affairs, which is why eligible veterans can get one with no down payment, up to certain limits, and is also why the rates are so low. The VA insures the loan for the lender, which provides the same security as a down payment and also reduces the risk so VA lenders can charge a lower mortgage rate.
Eligible veterans and active duty personnel can get a VA loan through any VA-authorized lender, which includes many of the banks, credit unions, mortgage companies and other lenders throughout the country. Many now offer online lending, allowing you to not only get rates quotes online but also conduct nearly the entire loan application and approval process right from your home or office.
If you're thinking about getting a VA loan, you may have questions about eligibility, credit score and income requirements, closing costs and fees, the types of loans that are available and more. We've addressed some the most common questions below, as well as provided some hard-to-find answers as well. Just scroll down to find the information you need.
Who can get a VA loan?
While primarily intended to be home loans for veterans, VA loans are also available to active-duty personnel who have met certain service minimums. Loans for military spouses are allowed for survivors of deceased veterans in certain situations, as are those employed in certain other government branches.
The general rule is that veterans or active-duty personnel are eligible after 90 days of wartime service or 24 months of peacetime duty. Currently, that means personnel on active duty can qualify after 90 days. Different rules may apply to service prior to 1990. Those with a dishonorable discharge are not eligible.
Members of the National Guard or Reserve need six years of service to qualify unless called to active duty during war, in which case they can qualify with 90 days of service.
VA loans for military spouses are available if you are the surviving unmarried spouse of a veteran who died in service or of a service-related disability. Surviving spouses of veterans totally disabled from a non-service related cause may be eligible as well.
VA loan credit score requirements
Veterans with less-than-perfect credit may have an easier time qualifying for these military loans than for conventional Fannie Mae/Freddie Mac mortgages. VA loan guidelines do not require a minimum credit score, but individual lenders will have their own standards.
Some VA home loan lenders will approve a mortgage for borrowers with a FICO credit score as low as 580, though 620 is the more common minimum.
Veterans with no established credit history may be able to meet the qualifications for a VA loan by demonstrating a record of timely payments on recurring expenses such as rent, utilities or cell phone bills.
VA mortgage guidelines allow veterans to qualify for a mortgage sooner after a foreclosure or bankruptcy than most other types of loans. Homeowners who have been through foreclosure can re-qualify for a new VA loan in as little as two years. Those with a Chapter 7 bankruptcy may apply for a VA home loan as soon as two years after the discharge date, while those with a Chapter 13 may qualify after as little as one year of making timely payments on the bankruptcy obligations.
VA loan income guidelines
VA loan requirements for buyers are similar to other mortgages when it comes to debt loads and income.
VA mortgage guidelines on income requirements are similar to other mortgages when it comes for debt-to-income limits, VA home loan lenders typically like to see a borrower's total monthly debt payments, including the mortgage, at no higher than 41 percent of gross monthly income, similar to other types of home loans. No more than 28 percent of gross monthly income should be for the planned mortgage payment, including property taxes and homeowner's insurance. Lenders may go higher in some situations, however.
How much can I borrow with a VA loan?
There's no limit to how much veterans can borrow with a VA loan. However, there is a cap on how much they can borrow without a down payment. In most of the U.S., that limit is $453,100 (2018 limit, though you can go as high as $679,650 in counties with high real estate values and up to $721,050 in Hawaii.
Veterans can use a VA loan to buy a home that costs more than the local VA loan limit, but will need to make a down payment of 25 percent of the excess. So if the VA loan limit for your county is $453,100 and you buy a home that costs $493,100, you'd need a down payment of $10,000.
The VA Loan Guaranty explained.
The amount veterans can borrow without a down payment is based on the VA Loan Guaranty, which is the key to how VA home loans work. The VA doesn't actually make loans for veterans itself, but instead guarantees part of the loan amount on approved mortgages issued by authorized lenders. This typically is 25 percent of the purchase price, up to the limits described above. So if a VA borrower defaults on a $400,000 mortgage, the VA will pay the insurer up to $100,000 to cover losses not recovered through foreclosure.
For the lender, the VA's guaranty is like having a 25 percent down payment as a hedge against default. So the VA borrower gets all the benefits of a hefty down payment – low interest rate, easier qualifying, no recurring fees for private mortgage insurance – without having to put out the cash. Of course, he or she is still responsible for paying off 100 percent of the loan.
If you don't borrow the maximum you're allowed without a down payment, you'll still have some of your VA Loan Guaranty remaining, which you could apply toward buying a second or vacation home. The formula for figuring how much of your guaranty you have left is fairly complicated though, as it depends on the lending limits for the county where you bought your first home and the one where you plan to buy a second. A VA lender can help you with this calculation.
More information: The VA Entitlement explained
Can I get a second VA loan?
As noted above, if you still have some of your guaranty left after purchasing a home, you can use it to get a another VA loan to purchase a second home for your personal use. However, once you use up your full guaranty amount, you cannot obtain further VA loans.
There is a one-time exception: you can apply to have the full amount of your guaranty restored once you pay off your VA loan in full. This often happens when a veteran sells their home and desires another VA loan to buy a new one. But you can only do this one time.
Limited closing costs
With a VA home loan, your closing costs are limited. VA mortgage guidelines state that borrowers may pay only those closing costs deemed "allowable and customary." These include the appraisal, credit report, property survey, flood or other hazard insurance, title fees and the VA funding fee (more on that later).
Other fees MUST be paid by either the lender or seller – they cannot be paid by the borrower. These include attorney fees, brokerage fees, loan application fees, lender appraisals, document preparation, loan closing or settlement fees, rate lock fees and many others.
What is the VA funding fee?
The VA funding fee is an upfront fee charged on all VA loans for veterans. For members and veterans of the regular military getting their first VA loan, it is 2.15 percent of the amount borrowed for mortgages with less than 10 percent down, including those with no down payment.
Overall, the fee ranges from 0.5 – 3.3 percent, with the lowest fee charged to those who are refinancing an existing VA loan. Otherwise, the fee varies according to the size of the down payment, whether the borrower is a member or veteran of the Reserve or National Guard, and whether the borrower has previously used a VA loan. The fee is waived for those with certain disabilities and surviving spouses of those who died in service.
On manufactured homes, the VA funding fee is 1 percent.
The fee may be rolled into the loan amount, so you don't have to pay it up front.
How to get a VA loan
Eligible veterans and active-duty personnel can apply for a VA loan through any VA home loan lender. These are regular banks and other mortgage lenders that have been approved to handle VA loans.
The first step in applying for a VA loan is to complete a Request for Certificate of Eligibility, VA Form 26-1880, available from VA-authorized lenders. With many VA home loan lenders, you can obtain and submit your request online. You will need to provide proof of your military service or other eligible status. Once you receive your certificate, you can apply for the mortgage with any VA-authorized lender.
When applying for a VA loan, you want to shop around to be sure to find the best VA loan lenders. Check with at least three and perhaps more, and compare both VA loan rates and closing costs to see who has the best deal. Shopping for online can make it easier to compare multiple lenders and find the best one.
You can use the form at the top of the page to get personalized quotes from lenders tailored to you and the VA loan you are seeking.
Can I afford a VA loan?
Need a VA loan calculator to determine what you can afford? Use our Mortgage Qualifying Calculator to figure what your payments would be and what you can afford to buy with a VA home loan with your income.
Allowed uses for VA loans
A VA mortgage loan can be used for a wide range of purposes related to home ownership. You can use one to buy a single-family home, a unit in a residential condominium or a manufactured home and lot.
A VA cash-out refinance lets eligible veterans and service members borrow money for any purpose, including home repairs and improvements, or as a military consolidation loan to pay off existing bills. There's also a VA Energy Efficient Mortgage that lets you borrow up to $6,000 for energy efficiency improvements on top of what you need to purchase or refinance your home.
There's a VA Streamline Refinance option that makes it easy to refinance an existing VA loan to a lower mortgage rate. Eligible veterans can also use a VA mortgage loan to refinance another existing mortgage, even if the current mortgage is not a military loan.
Here's a look at the various types of home loans for veterans that are available with VA backing.
Types of VA loans
Home purchase loans
VA home loans are available as either fixed-rate or adjustable-rate mortgages (ARMs). The most popular option is the VA 30-year fixed-rate mortgage, while 15-year loans offer lower rates and are often used for refinancing. Also available, but less common, are fixed-rate loans with terms of 20 or 25 years.
VA adjustable-rate mortgages are available as hybrid ARMs, where the initial rate is fixed for a period of 3, 5, 7 or 10 years before adjusting, or as a standard ARM, where the rate resets every year. Rate resets on VA ARMs are typically based on current rates for 1-year U.S. Treasury bonds.
VA Streamline Refinance
Another benefit of VA home loans is the VA Streamline Refinance. Also known as a VA Interest Rate Reduction Refinance Loan (IRRRL), this offers an expedited way to refinance an existing VA loan to a new loan at a lower rate.
In general, all you need to qualify is to 1) currently have a VA home loan 2) be current on your mortgage payments and 3) had no more than one late payment over the past year. That means no income verification, income documentation or home appraisals.
In addition, the new loan must either have a lower monthly payment than your current loan, or be to refinance from an ARM to a fixed-rate mortgage. It's a good choice when VA mortgage rates today are lower than what you're currently paying.
You can even do a VA Streamline Refinance if your home has fallen in value, leaving you underwater on the mortgage (owing more than the property is worth).
VA cash-out refinance
A VA cash-out refinance allows you to borrow against your home equity to obtain funds for any purpose you wish. These are sometimes referred to as military consolidation loans when they're used to pay off other debts. But you can also use the funds for home improvements, investing in a business, paying for college or other big-ticket expenses.
You can also use a VA cash-out refinance to refinance a non-VA mortgage into a VA home loan.
The VA allows you to tap up to 100 percent of your home equity in a cash-out refinance, so you can still do one even if you don't have a lot of equity to work with.
A VA cash-out refinance can be a particularly good way to borrow against your home equity if today's VA mortgage rates are lower than the rate you're currently paying. However, if rates are higher than what you're currently paying, you might want to explore other options, such as a non-VA home equity loan (see below).
VA home equity loans
The VA does not guarantee home equity loans or home equity lines of credit (HELOCs). Instead, it allows eligible homeowners to borrow against up to 100 percent of their home equity through a cash-out refinance (see above).
You can also apply for a conventional home equity loan outside the VA system. For example, if you're only looking to borrow a small amount of money, the fees for a conventional home equity loan may be less than you'd pay for a VA cash-out refinance. Furthermore, if mortgage rates have risen since you obtained your VA loan, a cash-out refinance would mean giving up the low rate you presently have.
VA home improvement loans
The VA does not support any conventional home improvement loans. You can obtain funds for home improvements by a cash-out refinance backed by the VA, but the VA does not offer an option for taking out a second lien specifically for home improvements or any other purpose. See the explanation of home equity loans, above.
There is the Energy Efficient Mortgage for funding energy efficiency improvements but that must be included with the VA home loan used to pay for the property (see below).
VA Energy Efficiency Mortgages
Though the VA does not offer conventional home improvement loans, it does offer an option for homeowners to borrow additional funds to pay for energy efficiency improvements at the time they buy their home.
A VA Energy Efficiency Mortgage (EEM) allows homebuyers to borrow up to an additional $6,000 to pay for energy improvements on top of what's needed to purchase their home. These funds can be used for new windows, insulation, a high-efficiency furnace or water heater and more.
The amount borrowed is rolled into the VA home loan, so there's only one loan and monthly mortgage payment to deal with.
VA small business loans
The VA itself does not guarantee small business loans or have a dedicated program for VA business loans. However, the VA can provide veterans with assistance in arranging a startup or other small business loan through the VA Office of Small & Disadvantaged Business Utilization. This typically involves arranging loans through the U.S. Small Business Administration, which has several programs designed for veterans.
Depending on how much money you need, some veterans may also opt to use a VA cash-out refinance as a startup loan for a small business.
VA auto loans
There are no VA auto loans as such. There is a one-time automobile grant that may be awarded to veterans and service members with certain disabilities.