By Bill Lyons | Updated on May 6, 2025
TABLE OF CONTENTS

    VA home loans were created in the 1940s and have drastically changed over the last 70 years, becoming one of the most popular veteran benefits. The VA loan program was designed to support veterans and service members by easing economic challenges while boosting the economy through expanded homeownership opportunities.

    As time passed, VA loan benefits, loan types, and limits have changed, making homeownership more accessible to veterans and service members. Today, VA loan benefits continue to provide significant support, including for surviving spouses.

    VA loan benefits have helped millions of veterans, service members, and families purchase homes, offering significant financial benefits that make home buying possible for veterans who may not qualify for traditional home loans. This article will discuss everything you need to know about VA loans and their benefits.

    KEY TAKEAWAYS

    • VA loans offer significant benefits for veterans, active-duty service members, and surviving spouses, including zero down payment, competitive interest rates, and no PMI.
    • The VA loan program helps make homeownership more accessible by reducing financial barriers such as high down payments and strict credit requirements.
    • With multiple types of VA loans available, such as VA-backed purchase loans and cash-out refinance loans, veterans have several options to suit their homeownership or refinancing goals.

    What Is a VA Loan?

    A VA loan is a mortgage program guaranteed by the U.S. Department of Veterans Affairs (VA) and offered through various lenders.  The loan is available to qualified borrowers, including active-duty service members and veterans, as part of their military benefits. VA loans have less stringent requirements than traditional home loans; borrowers can often put little to no money down on a home, get lower interest rates, and have lower closing costs, making them a great option for surviving members.  To qualify for a VA loan, borrowers must meet specific criteria, including:

    • Minimum military service requirements
    • A VA funding fee (unless exempt)
    • A Certificate of Eligibility (COE) from the VA
    • Meeting the lender’s credit and income standards

    To determine how much you can afford to borrow and estimate your monthly payments, consider using a VA loan calculator to get an idea of what fits within your budget. A patch of the US flag next to a wooden key with ‘VA LOAN” printed on it

    8 Benefits of VA Loans

    VA loans offer several benefits compared to traditional home loans and make a great option for first-time buyers. A few VA home loan benefits include the following:

    1. No down payment requirement

    One of the most significant benefits of VA loans is that they require no down payment allowing borrowers to purchase a home with $0 out of pocket aside from closing costs. Traditional lenders typically require a down payment of at least 3.5%, which can take years to save. With a VA loan, home buyers can bypass this hurdle and move into a home sooner.

    For example, say that you’re looking to purchase a home with an asking price of $500,000. If you use an FHA loan and put down 3.5%, your down payment will equal $17,500. However, with a VA loan, your down payment is 0%, saving you thousands of dollars on out-of-pocket expenses.

    While there’s no down payment required for these loans, there are advantages to making a down payment, including:

    Even a small down payment can lead to significant savings in the long run by reducing the amount you borrow and the interest that accrues over time.

    2. Competitive interest rates

    Military loan benefits often discuss the zero down payment option with a VA loan. However, qualifying borrowers can also get competitive interest rates, which may mean lower VA loan rates.

    Lenders typically charge lower rates for VA loans than conventional loans. While borrowers will still have to pay interest, lower rates mean saving thousands of dollars over the life of the loan.

    Your interest rates depend on your lender. If you’re unsure whether something is a competitive interest rate, be sure to shop around for rates and prices to help you make the best decision for yourself and your family.

    3. No PMI required

    Private mortgage insurance (PMI) is insurance required by lenders if borrowers get conventional loans. This insurance is a premium added to mortgage payments when borrowers make a down payment of less than 20% and applies to most loans except VA loans.

    For example, on the same $500,000 house we discussed before, to avoid PMI, a borrower would need to put $100,000 down on a home.

    As part of the military loan benefit, qualifying veterans and active-duty service members don’t have to worry about mortgage insurance because lenders don’t require it. Borrowers save even more money with a VA loan since annual mortgage insurance can add thousands of dollars to the total cost of a home loan.

    However, it’s important to note that there are other fees associated with VA loans, such as funding fees. Funding fees go to the VA, but some exceptions exist, such as having a service-connected disability.

    4. Flexible DTI ratio requirements

    A borrower’s debt-to-income (DTI) ratio compares your monthly debts to your monthly income to help lenders determine your ability to repay the loan. Lenders assess your ability to afford a loan by comparing your pre-tax income to expenses such as rent, mortgage payments, credit cards, student loans, and other debts.

    Most lenders look for a DTI ratio of 28 to 36% for conventional loans, but this can vary based on the lender.

    A drawing on a notebook of scales with ‘Income’ on one side and ‘Debt’ on the other placed on top of desk background.

    As we’ve mentioned, one of the most significant benefits of VA loans is that they have more flexible requirements. While conventional loans often require a debt-to-income (DTI) ratio of 36%, most VA lenders allow up to 41%. Some lenders may even approve DTIs as high as 55% or more, depending on factors like credit score and income. A higher allowable DTI gives borrowers more flexibility, making homeownership more accessible. To better understand how your debt-to-income ratio might affect your loan options, a VA loan affordability calculator can help you assess your financial situation and eligibility for a loan.

    5. Lower credit requirements

    Most loans have strict credit requirements. However, you can get a VA loan with bad credit, making it significantly easier for military members to become homeowners.

    To qualify for a conventional loan, borrowers typically need a minimum credit score of 620. However, the higher your credit score, the lower your interest rate, so borrowers should aim for a credit score of at least 740 when applying for a loan.

    You can still qualify for VA loans with a low credit score of 500 however, lenders will offer better interest rates for credit scores of at least 620 or higher.

    6. Limited closing costs

    Closing costs are a part of every loan. They’re the fees you pay to the lender for creating your loan and cover a wide range of services. Borrowers pay the closing costs when signing the final paperwork to obtain the loan, but VA loan closing costs are slightly different from those for traditional mortgages.

    Lenders don’t require you to pay non-allowable fees when you use a VA loan. However, your lender may require allowable fees, such as the VA funding fee, loan origination fees, title insurance, credit report fees, and discount points.

    Additionally, lenders charge origination fees for the underwriting process, but there are limits on how much they can charge. For example, lenders can’t charge VA borrowers more than 1% of the total loan amount in origination fees.

    The amount you’ll have to pay in closing costs will vary by lender, the home you purchase, and loan details. However, they’re typically 3%-6% of the value of the home.

    7. Advantageous refinancing options

    VA home loan benefits don’t just cover purchasing a home. VA borrowers can also reduce their interest rates with a VA Interest Rate Reduction Refinance Loan (IRRRL). The IRRRL loan can be used to refinance an existing VA loan for lower interest rates. In order to be eligible for an IRRL loan, borrowers must:

    • Already have a VA-backed home loan
    • Use the loan to refinance their existing VA loan
    • Prove they currently live in the home or previously used it as their primary residence

    8. Lifetime benefit

    One of the biggest advantages of a VA loan is that VA loan benefits last a lifetime, meaning you can use this military benefit multiple times with no limit.

    However, this benefit may vary based on your entitlement. Your VA entitlement is a specific amount the VA will repay to the lender if you default on the loan. Qualifying veterans have two levels of entitlement they can use to purchase a home.

    Eligible veterans and service members can restore their full entitlement after repaying their home loan in full. They can also use any remaining entitlement to purchase a second home while still benefiting from the same advantages as their first VA loan.

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    Types of VA Loans

    The most significant benefit of a VA loan is that it makes homeownership more accessible and affordable for veterans and active-duty service members. You can use several types of VA loans to purchase or refinance a home.  A few options include the following:

    • VA Purchase Loan: A VA-backed purchase loan is the most common option and helps veterans buy, build, improve, and refinance homes. These loans have competitive interest rates and don’t require a down payment or PMI. With a VA purchase loan, borrowers can secure better financing terms than conventional mortgages, but terms vary by lender, and not all private lenders offer VA loans. Additionally, with these loans, you can choose an adjustable or fixed-rate mortgage to help you find the best option based on your financial situation.
    • Cash-Out Refinance Loan: VA-backed refinance loans allow individuals with VA loans to reduce their monthly payments and the overall total cost of the loan. These loans reduce interest rates while letting borrowers replace their current loan with a new one to take cash out of home equity or refinance a non-VA loan into a VA loan. With a VA cash-out refinance loan, borrowers can use up to 100% of the home’s equity for anything from bills to other expenses and investments, allowing borrowers to access their home’s value.
    • VA Interest Rate Reduction Refinance Loan (IRRRL): IRRRL loans allow borrowers to switch mortgage plans and payments to lower their monthly interest rates or chance repayment terms. To qualify, borrowers must have an existing VA loan. However, the VA will only approve these loans if new terms provide a financial benefit, such as lower monthly payments.
    • Native American Direct Loan (NADL) Program: The NADL program helps eligible Native American veterans and their spouses use their VA loan benefits to purchase homes on federal trust land. You may also use the loan to refinance or improve the home, or for construction to allow borrowers to build their own homes. To qualify for this loan, the tribal organization must participate in the VA direct loan program and have a signed Memorandum of Understanding with the VA that determines the program’s conditions.

    How to Apply for a VA Loan

    A photo of keys, loan documents and house blueprints in focus in the foreground, with a couple and a lender out of focus in the background.

    The process for how to apply for a VA loan is similar to applying for any other home loan. In most cases, you can do it online as long as you have your paperwork prepared. The process varies for everyone, but it typically looks something like this:

    1. Find a Mortgage Lender

    Always shop around for a mortgage lender to help you find the best interest rates for your loan. You can get quotes online or call lenders directly to help you understand your VA loan options and if you’re qualified. Remember that it’s also helpful to get VA loan pre-approval. This process will give you a clear idea of how much you can borrow and streamline the application process.

    2. Obtain Your Certificate of Eligibility

    To apply for a mortgage loan, you must have your Certificate of Eligibility (COE) from the VA. Some mortgage lenders can contact the VA on your behalf, or you can request your COE directly from the VA. Since processing can take six weeks or longer, it’s best to make a request as soon as you know you want to purchase a home. Your COE shows lenders how much the VA will guarantee on your VA loan, which can affect how much you can afford.

    3. Find Your Dream Home & Sign a Purchase Agreement

    Once you find a home, you must sign a purchase agreement. Then, an agent will help you complete the application process to make it as easy as possible. To apply for the loan, you’ll need all the necessary paperwork, which includes bank statements, pay stubs, and your COE.

    4. Processing

    After completing your application, the VA will perform an appraisal to determine whether to grant the loan based on a valuation of the property and how much the home is worth.

    5. Closing

    Once the appraisal is complete and the loan is approved, you can close on the loan. During closing, you’ll review the paperwork with your agent, provide proof of homeowner’s insurance, sign documents, and pay closing costs. Then, once the loan is finalized, you can move into your new home.  A keychain with a silver house and key laying on top of the stars of the American flag.

    Capitalize on VA Loan Benefits

    VA loans can help qualifying veterans and active-duty service members achieve homeownership, often at a lower cost than other loan options. However, even though lenders have less stringent requirements, borrowers must meet the requirements of the VA and obtain a COE to ensure they qualify for the loan.

    With a VA loan, borrowers can expect a 0% down payment, lower interest rates, and no PMI requirement. However, even if you don’t qualify, Griffin Funding has many mortgage options to suit your needs and budget. Plus, with the Griffin Gold app you can easily manage your finances, access smart calculators, and receive a personalized homeownership access plan.

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    Frequently Asked Questions

    How can I use a VA loan?

    You can use VA loans to purchase, refinance, construct, or improve a primary residence; borrowers can’t use them for an investment property or vacation home unless the property serves as their primary residence. 

    Instead, they must be used to purchase an owner-occupied property. VA loans are typically used on single-family homes in residential neighborhoods. That said, they can be used for any type of primary residence, including any of the following:

    • Townhomes and condos: As long as the VA has approved a townhome or condo development, borrowers can use their VA loans to purchase them. If the development isn’t approved, your lender can work with the Homeowner’s Association (HOA) to help them get approved. Unfortunately, this process can take several months, so it’s usually best to find already-approved communities if you don’t want to wait to become a homeowner. 
    • Manufactured and mobile homes: Veterans can use their VA loans to purchase mobile or manufactured homes, but not all lenders will finance these properties since they’re riskier investments. Usually, the values of these homes depreciate over time, unlike houses and condos that increase in value as the years go by. However, using a VA loan to purchase a manufactured home might be ideal if a borrower already owns the land. 

    How do I qualify for a VA loan?

    Not all veterans or active duty service members qualify for VA loans. To qualify for VA loans, borrowers must meet one or more requirements set by the VA, such as serving for 90 consecutive days of active service during wartime.

    Some spouses may also qualify for VA loans if they became widowed due to service or if their loved one has a service-related disability. 

    Unfortunately, not everyone who has served in the military meets these requirements, but they still may be eligible for a VA loan, depending on discharge type. For example, individuals discharged for hardship or at the government’s convenience may still qualify for a VA loan. 

    If you’re unsure whether or not you qualify for a VA loan, you can contact the VA. Then, if you qualify for the loan, you can obtain your COE to verify that you meet the minimum requirements set by the VA. Meanwhile, spouses can verify their VA loan eligibility using a COE and various other forms of documentation. 

    What is the maximum VA loan amount I can get?

    In the past, there were limits on how much borrowers could receive through the VA loan program. However, this no longer applies to borrowers with their full entitlement. However, those with reduced loan entitlement must still follow VA loan limits. It’s important to remember that limits are not your maximum for how much you can borrow. Instead, they determine how much you can borrow without factoring down payments. 

    To have your full loan entitlement, you must have never used your loan benefit or paid a previous loan off in full. That said, if you have remaining entitlement, you have a loan limit based on the county loan limit where you live, which means potentially making a down payment if your loan amount is over $144,000. 

    What are the downsides to VA loans?

    While the benefits of a VA loan make homeownership more accessible for veterans and service members, there are some drawbacks to consider, including:

    • VA funding fee: While VA loans don’t require private mortgage insurance (PMI), they do come with a funding fee, which can add to the overall cost. Some borrowers, such as those with service-related disabilities, may qualify for an exemption.
    • Property restrictions: Homes purchased with a VA loan must meet the VA’s minimum property requirements, which can limit options, especially for fixer-uppers.
    • Primary residence requirement: VA loans can only be used for primary residences, meaning they’re not an option for investment properties or vacation homes.
    • Longer closing times: VA appraisals and approval processes can take longer than conventional loans, which may be a disadvantage in competitive housing markets.

    Despite these challenges, the benefits of a VA mortgage loan, such as no down payment and competitive interest rates, often outweigh the downsides for eligible borrowers.

    Bill Lyons

    Bill Lyons is the Founder, CEO & President of Griffin Funding. Founded in 2013, Griffin Funding is a national boutique mortgage lender focusing on delivering 5-star service to its clients. Mr. Lyons has 23 years of experience in the mortgage business. Lyons is seen as an industry leader and expert in real estate finance. Lyons has been featured in Forbes, Inc., Wall Street Journal, HousingWire, and more. As a member of the Mortgage Bankers Association, Lyons is able to keep up with important changes in the industry to deliver the most value to Griffin's clients. Under Lyons' leadership, Griffin Funding has made the Inc. 5000 fastest-growing companies list five times in its 11 years in business.