Resource Center

6.2. VA Loans

A VA loan is a loan guaranteed by the Veterans Administration. This type of loan is only available to certain borrowers through VA-approved lenders. The guarantee means that the lender is protected against loss if the borrower fails to repay the loan. With this guarantee, it helps you get a better rate and a lower payment each month.

To get a VA loan, you must be:

  • a current member of the U.S. armed forces
  • a veteran
  • a reservist/national guard member, or

VA mortgage loans can be guaranteed with no money down and there is no private mortgage insurance requirement.

Best fit for this type of loan: Most active-duty military and veterans qualify for Veterans Affairs mortgages. Many reservists and National Guard members are eligible. Spouses of military members who died while on active duty or because of a service-connected disability may also apply.

How they work: No down payment is required from qualified borrowers buying primary residences. The VA does not lend money, but guarantees loans made by private lenders.

Cost: The VA charges an upfront VA funding fee, which can be rolled into the loan or paid by the seller. The funding fee varies from 1.25 percent to 3.3 percent of the loan amount. Those who receive VA Disability are exempt from the funding fee.

The VA allows sellers to pay closing costs but doesn’t require them to. This means borrowers might need money for closing costs. Borrowers may also need money for an earnest-money deposit.

Pros: VA borrowers can qualify for 100 percent financing. Veterans do not have to be first-time buyers and may reuse their benefit.

Cons: According to the VA, there isn’t a cap on the amount you can borrow. However, there are limits on the amount of liability VA can assume, which usually affects the amount of money an institution will lend you. The loan limits are the amount a qualified veteran with full entitlement may be able to borrow without making a down payment. These loan limits vary by county, since the value of a house depends in part on its location. The VA national loan limit for 2018 is 453,100.