Guide to VA Home Loans: How They Work, Who Qualifies

This is an excellent, comprehensive summary of VA loans, incorporating details from the provided text. Let’s organize it for clarity and emphasize key takeaways.

Understanding VA Home Loans: A Guide for Service Members and Veterans

If you’ve served in the military and are considering homeownership or refinancing, a VA loan can be a powerful financial tool. Guaranteed by the U.S. Department of Veterans Affairs (VA) and issued by private lenders, VA loans offer unique benefits to qualified U.S. Veterans, active-duty military personnel, and some surviving spouses.¹ Established by the 1944 GI Bill of Rights, this program aims to help service members transition to civilian life and achieve homeownership.²

How a VA Home Loan Works

The core mechanism of a VA loan lies in the VA’s guarantee. This means the government promises to repay a portion of the loan to the lender if the borrower defaults. This guarantee significantly reduces the risk for private lenders (banks, credit unions, mortgage companies), enabling them to offer more favorable terms, most notably the ability to require no down payment.³

Favorable Terms: VA loan interest rates are typically lower than those for conventional loans.⁴ Rates can be fixed (payments remain constant) or adjustable (payments may change over time). While ARMs offer potential initial savings, they carry the risk of higher payments if rates rise.⁵
Lender Choice: While the VA guarantees the loan, you’ll apply through a private lender.⁶ Many lenders offer VA loans, and some specialize in serving VA borrowers. It’s highly recommended to apply with multiple lenders to compare their rates and terms to find the best fit for your situation.
Expert Assistance: Working with a lender and a real estate agent experienced in VA loans can be invaluable. An experienced agent can help you identify homes that are likely to meet the VA’s minimum property requirements, streamlining the appraisal process.⁷

VA Home Loan Eligibility

Eligibility for a VA loan is specific and depends on your service history and current financial standing:

Service Requirements: You are generally eligible if you meet one of the following criteria:
- Wartime Service: At least 90 consecutive days of active service during wartime.
- Peacetime Service: At least 181 days of active service during peacetime.
- National Guard or Reserve:
  - At least six years of service.
  - Or, 90 days of active duty under Title 32 orders, with at least 30 of those days being consecutive (updated for 2024 to specifically include Title 32, Sections 316, 502, 503, 504, or 505).⁸
Surviving Spouses: You may be eligible if you are the surviving spouse of a service member who died while on active duty or from a service-connected disability, and you have not remarried (with exceptions if remarried after age 57 and after December 16, 2003). Spouses of prisoners of war or service members missing in action are also eligible.⁹
Discharge Status: You may still qualify if discharged due to a service-related disability, even if you don’t meet standard length-of-service limits. However, “other than honorable,” dishonorable, or bad conduct discharges typically disqualify you.
Lender Requirements (Credit & Income):
- Credit Score: The VA does not set a minimum credit score.¹⁰ However, most lenders require a minimum FICO score, often ranging from 580 to 620 (for 2025, some sources indicate 620 is a common lender requirement).
- Income and Debt: Lenders will assess your income and debts to determine your ability to repay the mortgage. While the VA prefers a debt-to-income (DTI) ratio of no more than 41%, there’s flexibility.¹¹ If you can demonstrate sufficient “residual income” (money remaining after monthly debts to cover living expenses), your application may still be approved.
Property Requirements: The property must meet safety standards and building codes (VA’s Minimum Property Requirements) and must be your primary residence.¹² Borrowers are typically required to occupy the residence within 60 days of closing, though this can be extended to 12 months under certain circumstances.¹³

How to Apply for a VA Home Loan

The application process involves a few key steps:

Obtain a Certificate of Eligibility (COE): This document verifies to lenders that your military service meets VA loan requirements.¹⁴ A VA-approved lender can often obtain it for you. You can also request it directly from the VA online (via the eBenefits portal or Veteran Information Portal) or by mail (using VA Form 26-1880).¹⁵ Required documents for the COE vary by service status (e.g., DD Form 214 for Veterans, Statement of Service for active duty, NGB Forms 22/23 for National Guard).¹⁶
Find the Right Lender: Shop around! Get preapproved with several VA mortgage lenders to compare their qualification requirements, interest rates, and loan types offered. Preapproval is non-binding but provides a clear idea of what you qualify for and demonstrates your seriousness to sellers.¹⁷
Find a Home and Close the Loan: Work with an experienced real estate agent to find a home that meets the VA’s minimum property requirements (cleanliness, safety, structural soundness). Once you make an offer, the lender will evaluate your finances and order a VA appraisal. If approved, you proceed to closing.

Pros and Cons of VA Home Loans

Pros:

No Down Payment: For most eligible borrowers with full entitlement.
No Mortgage Insurance: Unlike FHA loans (which always require it) or conventional loans (which require it if less than 20% down).
Lower Rates: VA loan rates are typically lower than conventional mortgage rates.¹⁸
Limited Closing Costs: The VA caps the lender’s origination fee at 1% of the loan amount and prohibits certain other closing costs.¹⁹
Assumable Loans: VA loans can often be assumed by a new buyer (even if they’re not a Veteran) when you sell your home.²⁰ This can be an attractive selling point if your interest rate is lower than current market rates. The buyer must meet credit and income requirements and pay a VA funding fee.²¹

Cons:

VA Loan Funding Fee: While there’s no mortgage insurance, a one-time funding fee is typically required.²² As of April 7, 2023, this fee ranges from 1.25% to 3.3% of the loan amount, depending on your down payment and whether it’s your first time using the benefit. It can be paid upfront or rolled into the loan. Certain disabled Veterans and Purple Heart recipients are exempt.²³
Primary Residence Only: VA purchase loans cannot be used for investment properties or vacation homes.
Property Eligibility: Homes must meet the VA’s Minimum Property Requirements.²⁴ “Fixer-uppers” or homes requiring significant renovations may not qualify without prior repairs.
VA Jumbo Mortgage Down Payment: While loan limits are generally eliminated for those with full entitlement, if the home price exceeds the county limit and you don’t have full entitlement, it becomes a VA jumbo loan requiring a down payment. However, the down payment percentage is usually lower than for conventional jumbo mortgages.

VA Loan Limits (2025 Update)

For eligible service members and Veterans with full VA loan entitlement, loan limits were eliminated as of January 1, 2020.²⁵ This means there’s no maximum loan amount for which the VA will guarantee a portion, provided you meet your lender’s financial qualifications.
However, loan limits still apply to borrowers who have an existing VA loan or have defaulted on a previous VA loan and do not have full entitlement restored.²⁶
In 2025, the standard VA loan limit for a single-family home in a typical U.S. county is $806,500, but it can be as high as $1,209,750 in high-cost areas.
If the home price exceeds your applicable county limit, you can still get a VA loan, but you will be required to make a down payment (this becomes a VA jumbo loan).

Refinancing a VA Home Loan

The VA offers several refinancing options:

VA Interest Rate Reduction Refinance Loan (VA IRRRL – “Streamline”): This popular option is only available to Veterans with an existing VA mortgage.²⁷ It simplifies refinancing to a lower interest rate or converting an adjustable-rate mortgage to a fixed rate, often without requiring a credit check, income verification, or appraisal. The new interest rate must generally be lower than the current one (unless converting an ARM to a fixed rate).
VA Cash-Out Refinance Program: This allows qualified homeowners (whether they have a VA loan or a conventional mortgage) to refinance their current loan into a new VA loan for a larger amount, allowing them to extract cash from their home equity.²⁸ This cash can be used for various purposes, though it’s often recommended for wealth-building expenses like home renovations. You can typically refinance up to 90% of your home’s home value without needing mortgage insurance.²⁹

Other Home-Related VA Programs

The VA loan program extends beyond basic purchase and refinance options:

VA Energy Efficient Mortgage (EEM): Allows borrowers to finance up to an additional $6,000 for qualified energy-efficient improvements to the home (e.g., solar panels, insulation, storm windows, HVAC upgrades).³⁰ These must be permanent improvements and typically require documentation of energy savings for amounts over $3,000.
VA Rehab and Renovation Loan: While not as commonly offered by all lenders as the EEM, this can finance the cost of broader home improvements.³¹
Native American Direct Loan (NADL): This program provides direct loans from the VA (not private lenders) to eligible Native American Veterans to buy, build, improve, or refinance a home on federal trust land.³² The Veteran’s tribal government must have a Memorandum of Understanding (MOU) with the VA.

How Many Times Can You Use a VA Home Loan?

The VA loan benefit is generally reusable.³³ You can obtain another VA loan if:

You sell the house and fully pay off the VA loan.
You sell the house, and another qualified Veteran assumes your VA loan (your entitlement can be restored).³⁴
You repay the VA loan in full but keep the house. In this specific scenario, you can get another VA loan once to purchase an additional home as your primary residence.

Additional Benefits for Disabled Veterans

Qualifying disabled Veterans may be eligible for significant extra benefits:

Exemption from the VA Loan Funding Fee: This is a key financial advantage. As of January 1, 2020, this waiver also extends to active-duty Purple Heart recipients who provide proper documentation.³⁵
Specially Adapted Housing (SAH) Grant: This grant provides funds for severely disabled Veterans to build, buy, or modify a home to make it more medically accessible. The grant cap varies annually (e.g., $100,896 in 2021).
VA Temporary Residence Adaptation (TRA) Grant: Designed to help disabled Veterans with funds to modify a relative’s home for temporary medical accessibility.

Consider Life Insurance Coverage for Your Home

A home loan is a significant financial commitment. Life insurance can provide financial protection for your loved ones by ensuring mortgage payments and living expenses are covered if something happens to you.³⁶ While SGLI and VGLI offer some coverage, they have limitations:

Coverage Amount: The maximum SGLI/VGLI coverage of $500,000 may not be enough to cover a large mortgage and family needs.
SGLI Termination: SGLI ends 120 days after separating from service.³⁷
VGLI Limitations: There’s a limited application window (240 days of separation), and VGLI rates can be less competitive than other options, especially for non-smokers.
Civilian Policy Exclusions: Traditional civilian policies may have “war clauses” or exclusions for service-related deaths.³⁸

Organizations like the Military Benefit Association (MBA) offer group life insurance plans specifically for the military community with benefits like no war clauses, higher coverage (up to $1,000,000), no time limit to enroll, and often more cost-effective premiums compared to VGLI.³⁹