A Complete Overview of VA Loans Guidelines – VA Loans: The Complete Guide

Thank you for your service! The VA loan program is a significant benefit designed to help eligible Veterans, service members, and their families achieve homeownership.¹ These loans are partially backed by the Department of Veterans Affairs (VA) but are issued by private lenders, such as Capital Bank Home Loans.²

What is a VA Loan?

A VA loan is a mortgage option offering low or even zero-down payment to eligible Veterans, active-duty service members, and their families.³ The Department of Veterans Affairs provides a partial guarantee on these loans, making you a less risky borrower for private lenders and offering more flexibility in the home buying process.⁴

Types of VA Loans

There are several types of mortgage loans you can apply for under the VA program:

Purchase Loan: Used to buy a new or existing home.⁵
Cash-Out Refinance Loans: Allows you to refinance your mortgage and take cash out from your home’s equity.⁶
Interest Rate Reduction Refinance Loan (IRRRL): A streamlined refinance option for those who already have a VA loan, typically used to lower interest rates or monthly payments.⁷
Native American Direct Loan (NADL): A direct loan from the VA for eligible Native American Veterans and their families to purchase or refinance a home on federal trust land.⁸

VA Loan Benefits

VA loans offer unique advantages specifically for eligible military personnel and their spouses.⁹ The government’s backing of up to 25% of the loan value makes you a less risky borrower to private lenders, providing greater flexibility.¹⁰

The primary benefits of VA loans include:

No Required Down Payment (in some cases): A significant advantage, as some VA loans offer 100% financing to qualifying Veterans, meaning no money down is required.¹¹
No Private Mortgage Insurance (PMI): Unlike most other loan types where PMI is required for down payments less than 20%, VA loans do not require PMI, even with no money down.¹²
No Restrictions on Where or How Much You Borrow (with full entitlement): The Department of Veterans Affairs does not set a limit on the amount you can borrow if you have full entitlement, though you must still qualify based on income and employment.

Other notable VA loan benefits may include:

Better terms and interest rates.
No penalty fees for paying off your loan early.¹³
Fewer closing costs.

VA Loan Requirements

While the benefits are substantial, certain requirements must be met for VA loan applications:

Credit Score Requirements: Although the VA itself does not specify a minimum credit score, private lenders will have their own minimum requirements.¹⁴ Some lenders may allow you to apply with a lower credit score, but it might result in additional fees.
Debt-to-Income (DTI) Requirements: Your DTI ratio is another critical factor.¹⁵ While it depends on the lender and your personal situation, a maximum acceptable DTI for a VA loan is generally around 45%. In some cases, your DTI can be adjusted by factoring in any residual income you may have.¹⁶

VA Loan Restrictions

Beyond eligibility requirements, there are also restrictions concerning the types of properties you can purchase with a VA loan:

Primary Residence: The home you purchase with a VA loan must be intended as your primary residence.¹⁷ This means you and your family must plan to live in the home after buying it. VA loans do not cover investment properties or vacation homes.
Property Must Qualify for VA Loan (Minimum Property Requirements – MPRs): Before you can purchase a home with a VA loan, the property must meet specific VA standards.¹⁸ A VA-appointed appraiser will assess the house.¹⁹ Generally, the home must be a conventional (non-unique) property in good working condition. Key property condition requirements include:
- Mechanical systems operating safely and having reasonable future utility.
- Adequate and functional heating supply.
- Roofing in good condition with no major leaks.
- Property free of structural threats like termites, rot, or fungus.20
  It’s generally advisable to avoid “as is” listed homes, as they often have issues that might not meet MPRs.
Conventional Property: VA appraisers generally prefer conventional family homes. Unique properties can complicate the process of finding comparable homes. Lenders may also have additional restrictions on certain unique homes, such as ranches, converted churches, or homes with geodesic domes.
Condos: For condominiums, the Department of Veterans Affairs maintains a condo database of approved developments.²¹ If your desired condo is not on the VA’s approved list, your lender can request VA approval for the development.²² However, this approval process can take several months and is not guaranteed.

Can You Have Two VA Loans at One Time?

Yes, as long as you have enough entitlement, you can have two VA loans simultaneously.²³ This scenario often arises when active-duty personnel are transferred and wish to purchase a new home without selling their existing property.

VA Loan Mortgage Limits

For eligible Veterans, service members, and survivors with full entitlement, there are generally no limits on the loan amount for VA loans.²⁴ However, your private lender will ultimately determine how large of a mortgage you can afford by assessing your credit history, income, and assets.²⁵

VA Funding Fee

The VA funding fee is a one-time payment applied to VA home loans. This fee is mandated by the U.S. government to help reduce the cost of the loan for U.S. taxpayers. You have several options for paying the VA funding fee:

You can roll it into the total amount of your loan, meaning it is financed as part of your mortgage.²⁶
You can pay the full amount in cash at closing.²⁷

Who is exempt from the VA funding fee?

The most common exemption is for service-disabled Veterans who are receiving VA compensation. You may also be eligible for a refund of the VA funding fee if you are later awarded disability status by the U.S. Department of Veterans Affairs.28

VA Loan Eligibility

Eligibility standards for a VA loan vary based on your military status: active duty, Veteran, Military Reserves or National Guard, and military spouse.²⁹ Specific service requirements apply. If you do not meet the minimum service requirements, you may still qualify if you were discharged for reasons such as hardship, reduction in force, certain medical conditions, or a service-related disability.³⁰

How to Apply for a VA Loan

Obtain a VA Home Loan Certificate of Eligibility (COE): This formal document from the VA confirms your eligibility.³¹ You will need to prepare specific information and documents, such as discharge or separation papers (DD214) for Veterans or surviving spouses, or a statement of service for active-duty personnel.³² You can apply for your COE through the VA’s eBenefits website portal or by mail using VA Form 26-1880.³³
Contact a Lender: Once you have your COE, reach out to a VA-approved private lender, such as Capital Bank Home Loans, to begin your VA home loan application.
Choose Your VA Mortgage Loan Option: Decide which type of VA home mortgage best suits your needs:
- VA-backed purchase loans for conventional home buying.³⁴
- Interest Rate Reduction Refinance Loan (IRRRL) if you already have a VA home loan and wish to reduce your payment or interest rate.³⁵
- VA-backed cash-out refinance loan to access home equity or refinance a non-VA loan into a VA-backed loan.³⁶
- Native American Direct Loan (NADL) if you or your spouse is Native American, as the VA acts as the direct lender for this program.³⁷

Contacting a VA lender like Capital Bank Home Loans, with their experience in VA loans, can provide answers to your questions and guide you transparently through the entire process, leading to a smoother path to closing on your home.38

Here’s a detailed explanation of VA Loans, incorporating information from the provided text:

VA Loans: A Comprehensive Overview

A VA loan is a specialized mortgage program designed to help eligible Veterans, active-duty service members, and certain surviving spouses achieve homeownership.³⁹ These loans are partially guaranteed by the Department of Veterans Affairs (VA) but are issued and serviced by private lenders, such as banks and mortgage companies.⁴⁰ The VA’s guarantee reduces the risk for lenders, which in turn allows them to offer more favorable terms to qualified borrowers.⁴¹

Key Benefits of VA Loans

VA loans come with significant advantages that make homeownership more accessible and affordable for those who have served:

No Down Payment (for most eligible borrowers): This is the most notable benefit.⁴² Qualified Veterans with full entitlement can often purchase a home with 100% financing, eliminating the need for a substantial upfront down payment.⁴³
No Private Mortgage Insurance (PMI): Unlike conventional loans that typically require PMI when a down payment is less than 20%, VA loans do not have this monthly insurance premium, regardless of the down payment amount.⁴⁴ This can result in significant monthly savings.
Competitive Interest Rates: Due to the VA’s guarantee, lenders often offer VA loans with lower interest rates compared to other mortgage types, potentially saving borrowers thousands over the life of the loan.⁴⁵
No Prepayment Penalties: VA loans do not impose penalties for paying off your loan early, giving you financial flexibility.⁴⁶
Limited Closing Costs: The VA sets limits on the closing costs lenders can charge, which helps reduce the upfront expenses for borrowers.⁴⁷
Flexible Credit Guidelines: While private lenders have their own credit score requirements (often ranging from 580 to 620 minimum, though some may go lower), VA loans generally offer more flexible underwriting compared to conventional loans, making them more accessible to borrowers with varying credit histories.⁴⁸
No Loan Limits (with full entitlement): For eligible Veterans with full VA loan entitlement, there are no VA-imposed limits on the loan amount. Your borrowing capacity will instead be determined by your lender based on your income, credit history, and assets.⁴⁹ Even for those with partial entitlement, the VA loan limits (which vary by county and are the same as Federal Housing Finance Agency conforming loan limits) help determine how much can be borrowed without a down payment.⁵⁰

Types of VA Loans

The VA loan program offers several options to meet different homeownership needs:⁵¹

VA Purchase Loan: The most common type, used by eligible individuals to buy a new or existing home, including single-family homes, condominiums, manufactured homes, and multi-unit properties (up to four units, if one is occupied by the borrower).⁵²
VA Interest Rate Reduction Refinance Loan (IRRRL): Also known as a “VA Streamline Refinance,” this option is for Veterans who already have a VA loan.⁵³ It’s designed to lower the interest rate or monthly payment with minimal paperwork, often without requiring an appraisal or credit underwriting.⁵⁴
VA Cash-Out Refinance: Allows qualified homeowners (even those with a non-VA loan) to refinance their mortgage and take cash out from their home’s equity.⁵⁵ This can be used for various purposes, such as debt consolidation or home improvements.⁵⁶
Native American Direct Loan (NADL): A direct loan issued by the VA (not a private lender) specifically for eligible Native American Veterans and their families to purchase or refinance a home on federal trust land.⁵⁷
VA Renovation Loan (VA Rehab Loan): Allows borrowers to finance approved repairs or updates into their home purchase or refinance, although these loans can be less common to find among lenders.
VA Energy Efficient Mortgage (EEM): Allows Veterans to finance up to an additional $6,000 for qualified energy-efficiency improvements as part of a home purchase or refinance.⁵⁸

VA Loan Requirements

While the VA sets broad eligibility, private lenders will have specific criteria:

Eligibility (Time in Service/Character of Service): Generally, active-duty service members, Veterans who meet specific service duration requirements (e.g., 90 consecutive days wartime, 181 consecutive days peacetime), and those with 6 years in the National Guard or Reserve (or 90 days under Title 32 orders with 30 consecutive days) may qualify.⁵⁹ Certain surviving spouses are also eligible if the Veteran died in service, from a service-connected disability, or was a POW/MIA, provided specific remarriage conditions are met.⁶⁰
Certificate of Eligibility (COE): This formal document from the VA confirms your eligibility for the loan benefit.⁶¹ While your lender can often help you obtain this, you may also apply directly through the VA’s eBenefits portal or by mail (VA Form 26-1880).⁶² Required documents for COE application vary by military status (e.g., DD214 for Veterans, Statement of Service for active duty, NGB Form 22/23 for Guard/Reserve).⁶³
Credit Score: The VA does not set a minimum credit score. However, most private lenders require a minimum credit score, typically ranging from 580 to 620.
Debt-to-Income (DTI) Ratio: This ratio compares your total monthly debt payments to your gross monthly income.⁶⁴ While the VA has a general guideline, often around 41%, lenders may approve higher DTIs if you have significant residual income (money left over after major expenses) or other compensating factors.

VA Loan Property Requirements and Restrictions

Certain restrictions apply to the properties that can be purchased with a VA loan:

Primary Residence: The property must serve as your primary residence.⁶⁵ VA loans cannot be used for investment properties or vacation homes. There are specific occupancy requirements, typically requiring you to move in within 60 days of closing, though exceptions exist for active duty personnel whose spouse or dependents will occupy the home.⁶⁶
Minimum Property Requirements (MPRs): The VA requires properties to meet specific safety, structural soundness, and sanitary standards.⁶⁷ A VA-appointed appraiser will assess the home to ensure it meets these MPRs.⁶⁸ Common issues that can cause a property to fail an MPR inspection include:
- Unsafe or non-functioning mechanical systems (heating, plumbing, electrical).
- Damaged or leaky roofs.
- Structural defects (e.g., foundation cracks, sagging floors).⁶⁹
- Pest infestations (termites, rodents) or damage from rot/fungus.⁷⁰
- Lack of safe and adequate access.
- Presence of lead-based paint in homes built before 1978 (may require remediation).⁷¹
- Issues with water supply or sewage systems.
  Homes sold “as is” frequently have MPR issues that need to be addressed before a VA loan can close.72
Conventional Property Types: VA appraisers generally prefer conventional residential properties. Unique or unconventional homes (e.g., geodesic domes, converted commercial buildings) can be challenging to get approved due to difficulties in finding comparable properties for appraisal.
Condominiums: For condominiums, the specific development must be on the VA’s list of approved condos.⁷³ If a condo is not on this list, your lender can submit a request to the VA for approval, but this process can take several months and is not guaranteed.⁷⁴

VA Funding Fee

The VA funding fee is a one-time government fee applied to most VA purchase and refinance loans.⁷⁵ It helps offset the cost of the loan program to U.S. taxpayers. The fee’s percentage varies based on several factors:

Loan Purpose: Purchase, Cash-Out Refinance, or IRRRL.
First-Time vs. Subsequent Use: Whether it’s your first time using the VA loan benefit.
Down Payment Amount: Making a down payment can reduce the fee.⁷⁶

Typical Funding Fee Rates (as of early 2025 data):

Loan Type	Down Payment	First-Time Use	Subsequent Use
Purchase/Cash-Out	0%	2.15% (2.3% in some sources)	3.3% (3.6% in some sources)
	5% to <10%	1.5% (1.65% in some sources)	1.5% (1.65% in some sources)
	10% or more	1.25% (1.4% in some sources)	1.25% (1.4% in some sources)
IRRRL (Streamline)	N/A	0.5%	0.5%
VA Loan Assumption	N/A	0.5%	0.5%

Exemptions from the VA Funding Fee:

Certain individuals are exempt from paying the VA funding fee:

Veterans receiving VA compensation for a service-connected disability.⁷⁷
Veterans who would be receiving disability compensation but are instead receiving retirement or active-duty pay.
Active-duty service members who have received a Purple Heart.⁷⁸
Eligible surviving spouses.⁷⁹

If you are later awarded disability status after closing on your loan, you may be eligible for a refund of the VA funding fee.⁸⁰ The funding fee can be paid in cash at closing or, more commonly, financed into the loan amount.⁸¹