What is a VA Home Loan?

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Point of Interest

For many veterans and military families, VA loans make homeownership a reality. Choosing a Veterans Affairs mortgage, often called a VA home loan, can make buying a home feasible and offer unique perks for veterans, active-duty military and their spouses.

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VA mortgages are exclusively available to veterans and active-duty military and have no down payment or mortgage insurance requirements. Borrowers who opt for a VA home loan can buy a home without any money down, making it especially useful for first-time homebuyers who don’t have a large down payment saved up.

Borrowers who put less than 20% down on a home with a conventional loan are typically required to pay mortgage insurance to offset the risk that the lender is taking on, but not with a VA loan. The VA secures these home loans, which means that borrowers do not have to pay mortgage insurance — even if they don’t have a down payment.

But, while the Department of Veterans Affairs secures VA loans, it is not the mortgage lender. Borrowers can take out a VA loan from many banks and non-bank mortgage lenders, including Freedom Mortgage and USAA, which exclusively offers VA mortgages.

Eligible borrowers can take advantage of VA jumbo loans when buying a home that costs more than $510,400. Refinancing is also an option through the Interest Rate Reduction Refinance Loan, also called the Streamline Refinance.

Tip: The only home loan for which the VA acts as a lender is for the Native American Direct Loan, which is a home loan available to Native Americans looking to buy a home on federal trust land.

Who is eligible for a VA home loan?

Veterans Affairs decides on potential borrowers’ eligibility for a VA home loan through a specific set of criteria. For military service members and veterans, eligibility is typically determined by when you served and for how long. National Guard members and military reservists may also be eligible if they meet the minimum active duty service requirement. Surviving spouses of veterans who died in service are also eligible for VA home loans in many cases.

Borrowers must present a COE (certificate of eligibility) from the VA to the lender and must also be able to meet the lender’s credit score and income expectations. There’s no established minimum credit score required for a VA home loan. While credit score requirements vary by lender, most lenders look for a FICO score of at least 580 to 620.

Pros and cons

Pros

  • No down payment and no PMI (private mortgage insurance) is required
  • No specific credit score minimum

Cons

  • Borrowers must receive a COE from the VA to apply 
  • Only available to veterans and military personnel who meet specific requirements

The final word 

VA home loans are an ideal option for veterans and active-duty military, especially those who are first-time homebuyers. Borrowers can benefit from paying no money down and will be able to avoid mortgage insurance costs altogether. With competitive rates and many lenders offering VA mortgages, VA loans make homeownership a reality for many Americans who served and their families.

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Rayna Perry

Personal Finance Copywriter

Rayna Perry is a Personal Finance Copywriter at Interest.com and a Public Relations major at the University of Georgia. When not writing about personal finance, she is usually watching a great movie or creating a new playlist.