What is a VA loan?

Veteran with familyThe VA home loan is a benefit available to eligible veterans who wish to purchase a home. VA loans do not require a down payment. In short, 100% financing and the home seller is permitted to pay all of the veteran's closing closing costs. VA mortgage rates tend to be lower than other loans.

In 1944, Congress passed and Franklin D. Roosevelt signed into law the Servicemen's Readjustment Act (the GI Bill of Rights). From this legislation, came the VA mortgage.

The benefits of the Veterans administration loan include:

  • Competitive Interest Rates - the VA interest rates are as low or lower than other home loans
  • Easier Qualification - there are fewer hoops to jump through
  • No Pre-Payment Penalty - the VA does not allow lenders to charge a pre-payment penalty
  • No Private Mortgage Insurance - unlike other home loans, there is no monthly mortgage insurance cost
  • Regulated Closing costs - the Veterans Administration
  • Seller Can Pay All Closing Costs - no other loan permits the seller to pay all closing costs
  • VA Loans Are Assumable - and the VA loan is assumable!
  • Zero Down Payment - absolutely no down payment. Finance the entire sales price.

VA home loans can be used to:

  • Build a house
  • Buy a house, a condominium unit in a VA-approved project
  • Buy a manufactured home and/or lot.
  • Improve a home by installing energy-related features or making energy efficient improvements
  • Simultaneously purchase and improve a home

VA loan questions 1 - 9

Are all VA loans no money down?

It depends on the loan amount, basic entitlement, and county loan limit. The Veteran's Administration guarantees 25% of the loan amount to the lender. In other words, if the loan is foreclosed by the lender, the Veteran's Administration will reimburse the lender for 25% of the loss. The Veteran's Administration uses a calculation to determine whether the loan meets the 25% loan guarantee.

Here are a couple of examples provided by the Veteran's Administration to illustrate the guarantee calculation:

Example 1
The veteran has full entitlement available and is purchasing a home for $300,000 where the county loan limit is $453,100. $453,100 X 25% = $113,275 Maximum Guaranty and Available Entitlement $300,000 X 25% = $75,000, Since the VA’s guaranty is limited to the lesser of 25% of the county loan limit or 25% of the loan amount, the VA will guaranty $75,000 on Veteran’s $300,000 loan in this county. A down payment should not be required.

Example 2
Veteran has full entitlement available and is purchasing a home for $480,000 where the county loan limit is $453,100. $453,100 X 25% = $113,275 Maximum Guaranty and Entitlement Available $113,275/ $480,000 = 23.60% Guaranty. Since VA’s Guaranty will be less than 25%, a down payment will likely be required to meet investor requirements. $480,000 X 25% = $120,000 $120,000 -$113,275 = $6,725 Down Payment

Are all VA loans no money down? A VA loan may require a down payment to meet the 25% guaranty percentage. Use the VA loan calculator to determine whether your loan will require a down payment.

Are national guard members eligible for VA loans?

National Guard members (or Reserve) may be eligible for a VA loan if they meet one of the following requirements:

Served six years in selected reserve and were either honorably discharged, retired, transferred to Standby Reserve, or an element of the Ready Reserve other than the Selected Reserve, after honorable service.

Served in active duty for more than 90 days during a wartime period
Served in the Selected Reserve for more than six years
Discharged or released from active duty for a service-related disability

Are there closing costs associated with a VA loan?

There are closing costs with a VA home loan. The veteran can expect title insurance, transfer tax and mortgage stamps (if applicable), appraisal and credit report fees and other fees just like any other mortgage.

Are there points on a VA loan?

At one time, the VA required the home seller to pay mortgage points, but that requirement has long passed. Today, points are not required with a VA home loan, however, the lender may offer a loan with point(s) in exchange for a lower interest rate.

Are there VA loan limits?

Technically, there are no loan limits on VA loans, however, the lender may have established loan limits. And, as previously mentioned, the 25% loan guarantee often limits the maximum loan size.

Are VA loan rates the same as conventional rates?

Loan rates tend to be lower than conventional loan rates because the VA home loan is guaranteed by the Veteran's Administration. The guarantee reduces the risk to the lender and for that reason, results in a lower interest rate.

Are VA loan rates the same at all banks?

The VA loan rates are not set by the Veteran's Administration, the interest rates are set by each individual lender. The interest rates will vary from lender to lender.

Can a buyer pay for a termite inspection on a VA loan?

Veterans are permitted to pay for the pest inspection in the following states only (for home purchases). Alaska, Arkansas, Arizona, California, Florida, Louisiana, Mississippi, Oklahoma, and Texas





1. What is a VA home loan?

2. Are all VA loans no money down?

3. Are national guard members eligible for VA loans?

4. Are there closing costs associated with a VA loan?

5. Are there points on a VA loan?

6. Are there VA loan limits?

7. Are VA loan rates the same as conventional rates?

8. Are VA loan rates the same at all banks?

9. Can a buyer pay for a termite inspection on a VA loan?

 10. Can a veteran get a VA loan with bad credit?

11. Can a lender charge points on a VA loan?

12. Can a national guard member get a VA loan? Can a VA loan be denied?

13. Can a VA loan be for 15 years?

14. Can a VA loan be used for a duplex?

15. Can a VA loan be used for a rental property

16. Can a VA loan be used for new construction?

17. Can a VA loan be used on a second home?

18. Can a VA loan be used to refinance?

18. Can a buyer pay closing costs on VA loan?

20. Can closing costs be added to a VA loan?

21. Can I get a jumbo VA loan?

22. Can I get a VA loan after bankruptcy?
23. Can a VA loan be used for a vacation home?

24. Can a VA loan be used to build a house?

25. Can I get a VA loan if I had a foreclosure?

26. Can the seller pay all closing costs on a VA loan?

27. Can the VA funding fee be rolled into the loan?

28. Do I have to escrow my property taxes with a VA loan?

29. Do I have to have a down payment with a VA loan?

30. Do I have to pay mortgage insurance on a VA loan?

31. How is the VA funding fee calculated?

32. Do I need a home inspection for a VA loan?

33. Do VA loans have a lower interest rate?

34. Do VA loans have closing costs?

35. Do VA loans have prepayment penalties?

36. Do VA loans require an appraisal?

37. Does a seller have to pay closing costs on a VA loan?

38. Do VA loans require escrow?

39. Does VA have loan limits?

40. How does a VA jumbo loan work?

41. How much can I afford for a VA home loan?

42. How much is pmi on a VA loan?