What Is a VA Loan?
A VA loan is a mortgage loan guaranteed by the U.S. Department of Veterans Affairs (VA). The VA does not lend money directly — instead, it guarantees a portion of the loan made by a VA-approved private lender, reducing the lender's risk and enabling them to offer more favorable terms. VA loans are available to eligible veterans, active-duty service members, and surviving spouses, and they are widely considered one of the most valuable financial benefits available to those who have served.
Key Benefits of a VA Loan
| Benefit | Details |
|---|---|
| No down payment required | Eligible borrowers can finance 100% of the purchase price with no down payment |
| No private mortgage insurance (PMI) | VA loans never require PMI, regardless of loan-to-value ratio |
| Competitive interest rates | VA-guaranteed loans typically carry lower rates than comparable conventional loans |
| No loan limit for full entitlement | Eligible borrowers with full entitlement can borrow above conforming limits without a jumbo loan structure |
| Assumable loan | A qualified buyer can assume your VA loan, potentially a selling advantage in a rising-rate market |
| IRRRL available | The Interest Rate Reduction Refinance Loan allows streamlined refinancing with minimal paperwork |
VA Loan Eligibility
To use a VA loan, you must first establish eligibility with the VA and obtain a Certificate of Eligibility (COE). General service requirements include:
- Active Duty: 90 consecutive days during wartime, or 181 days during peacetime.
- National Guard and Reserve: 6 years of service, or 90 days of active duty under Title 10 orders (with some wartime exceptions).
- Surviving spouses: Unremarried spouses of service members who died in the line of duty or from a service-connected disability may be eligible.
Beyond VA eligibility, you must also meet the lender's credit and income requirements. Most VA lenders look for a credit score of at least 620, though the VA itself does not set a minimum. You must intend to occupy the property as your primary residence.
VA Funding Fee
In lieu of mortgage insurance, VA loans charge a one-time funding fee paid at closing (or rolled into the loan balance). The fee partially offsets the cost of the VA guarantee program for taxpayers. The amount depends on your service category, down payment, and whether it is your first or subsequent use of the VA loan benefit.
| Down Payment | First Use | Subsequent Use |
|---|---|---|
| Less than 5% | 2.15% | 3.30% |
| 5% – 9.99% | 1.50% | 1.50% |
| 10% or more | 1.25% | 1.25% |
Veterans receiving VA disability compensation, surviving spouses of veterans who died in service or from a service-connected disability, and certain other categories are exempt from the funding fee entirely. For a detailed breakdown, see our guide: VA Loan Funding Fee Explained.
VA vs. FHA vs. Conventional: Side-by-Side Comparison
| Feature | VA Loan | FHA Loan | Conventional |
|---|---|---|---|
| Minimum down payment | 0% | 3.5% | 3% – 20% |
| Mortgage insurance | None (funding fee instead) | Upfront + annual MIP | PMI if LTV above 80% |
| Minimum credit score | No VA minimum (lenders typically 620) | 500 (580 for 3.5% down) | 620 (typically) |
| Who qualifies | Eligible veterans, active duty, surviving spouses | Any qualifying borrower | Any qualifying borrower |
| Loan limit | No limit with full entitlement | County limits apply | Conforming limit ($806,500 in 2026) |
When a VA Loan Makes the Most Sense
For eligible borrowers, a VA loan is almost always worth considering first. The combination of no down payment and no ongoing mortgage insurance can result in significantly lower monthly payments and long-term costs compared to FHA or conventional loans — even after accounting for the funding fee. The funding fee is a one-time cost; the absence of monthly PMI or MIP compounds in your favor over years.
The main scenario where a VA loan might not be the best fit is if you plan to use the property as a rental immediately, since VA loans require owner-occupancy. Additionally, some sellers in competitive markets are less familiar with VA appraisal requirements, though this has become less of a barrier as VA loan volume has grown.
Use the VA Loan Calculator to estimate your monthly payment and compare against FHA and conventional options. For a full overview, see What Is a VA Loan? For information on mortgage insurance on other loan types, see that glossary entry.
Source: VA.gov — VA Home Loans
This definition is for informational purposes only and does not constitute financial advice.