VA Loans

If you are a veteran, active-duty service member or spouse of a veteran or service member, you may benefit from the home loan program insured by the U.S. Department of Veterans Affairs (VA). VA mortgage lenders offer an assortment of home loans intended to meet different needs.

You can find VA home loans from any VA-approved mortgage lender, and there are plenty of them — banks, mortgage companies, credit unions and more.

You can use a VA home loan to:

Construct a single family home

Purchase a single family home, condominium unit (VA-approved) or co-op unit

Repair, renovate or upgrade a primary residence

Refinance a mortgage

Buy a manufactured home or a lot for a manufactured home

Pay for energy-efficient upgrades like solar heating or cooling systems

Ranking VA Lenders in the U.S.

Our list of VA-approved lenders lets you see who is funding VA loans. Browse lenders by the amount of VA business they do and see average loan amounts, or search for a specific lender.

1,195 Results
Lender Name Volume of Loans Number of Loans Market share Average Loan Amount
USAA FSB $2,088,315,795 8,945 11.14% $233,462
VETERANS UNITED HOME LOANS $1,013,742,091 4,941 5.41% $205,169
NAVY FEDERAL CREDIT UNION $823,024,229 3,514 4.39% $234,213
WELLS FARGO BANK, NA $771,577,204 3,361 4.12% $229,568
FLAGSTAR BANK FSB $372,680,630 1,482 1.99% $251,471
QUICKEN LOANS INC. $315,203,133 1,562 1.68% $201,795
STEARNS LENDING INC $280,071,872 928 1.49% $301,802
DHI MORTGAGE COMPANY LTD $248,741,752 935 1.33% $266,034
PRIMELENDING, A PLAINSCAPITAL COMPANY $231,790,082 1,012 1.24% $229,042
UNIVERSAL AMERICAN MTG CO LLC $221,820,356 787 1.18% $281,856

Source: U.S. Department of Veterans Affairs, June 2015

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VA Loan Eligibility

VA loans are available to a select group of people. VA loans are an employment benefit, and for those home buyers who are eligible for them, they’re generally considered a good deal.

You may be eligible for a
VA mortgage if…
  • You served 181 days during peacetime (Active Duty)
  • You served 90 days during war time (Active Duty)
  • You served six years in the Reserves or National Guard
  • Your spouse was killed in the line of duty
  • You worked for the National Oceanic and Atmospheric Administration or another eligible federal agency

See the VA Loan Requirements page to learn more about VA eligibility requirements.

Pros & Cons of VA Loans

Here are the most important advantages and disadvantages of VA home loans.

pros

No Down Payment

The VA mortgage program allows 100 percent financing with no limits on your loan amount. The VA does, however, limit the amount of its guaranty, and most lenders won’t lend more than four times the guaranty. A no-down payment requirement means veterans and service members can purchase homes quickly and keep more of their savings for emergencies or investments.

No PMI

Nearly all mortgages with loan-to-value (LTV) ratios above 80 percent require borrowers to buy mortgage insurance. For a $200,000 mortgage with a 5 percent down payment, this can mean an extra $90 to $192 a month. Avoiding mortgage insurance allows home buyers with VA loans to qualify for larger mortgages and purchase more expensive houses.

No Minimum Credit Score

The VA has no minimum credit score requirement. Instead, the loan originator must determine you are “a satisfactory credit risk, and ha(ve) present and anticipated income that bears a proper relation to the contemplated terms of repayment,” according to the VA Lenders Handbook. Nevertheless, lenders may set higher standards than the VA requires, and ask for down payments from some borrowers. (See VA Loan Requirements to learn more.)

One-Time VA Funding Fee Can Be Included In the Loan

Although the VA doesn’t charge mortgage insurance premiums, you must pay an upfront funding fee. The fee ranges from 1.25 to 3.3 percent and depends on several factors — including your status (active duty or Guard and Reserve), down payment percentage, and use (first-time borrower or subsequent borrower). You may add the funding fee to your loan balance.

The Disabled Pay No Upfront Funding Fee

The upfront funding fee does not apply in some circumstances. You are exempt from paying the funding fee if you are entitled to receive compensation for service-connected disabilities, regardless of whether you actually receive it, or you are a surviving spouse of a veteran who died while in service or from a service-connected disability. (See VA Loan Fees to learn more.)

Seller Is Allowed to Pay the Closing Costs

VA home buyers can receive concessions from sellers of up to 4 percent of the property sales price. That’s in addition to seller-paid buyer’s closing costs. Concessions can take many forms — throwing in furniture or a boat, buying down the loan’s interest rate by paying discount points on the buyer’s behalf or paying off other accounts.

Assumable

A VA home loan is also attractive because it’s assumable. If you decide to sell your property later, a qualified purchaser can assume, or take on, the loan and its payment obligations. Your buyer doesn’t have to be a veteran, and the property doesn’t have to be the buyer’s primary residence.

Lower Rates Than Conventional Loans, Typically

VA mortgages often come with rates lower than those of other programs. Data from Ellie Mae (see chart below) shows in 2014 and 2015, VA mortgage rates were lower than Federal Housing Administration or conventional rates. Keep in mind that Ellie Mae tracks the note rate, not the APR, which includes the cost of mortgage insurance. When you include the cost of mortgage insurance, VA loans are even more attractive.

chart

100 Percent Cash-Out Refinancing

Unlike other refinance programs, VA loans allow you to cash-out 100 percent of your home’s equity. Although the VA permits this, many lenders limit cash-outs to 90 percent. Still, a 90 percent cash-out is better than other programs, which typically permit a maximum cash-out of 85 percent. Additionally, unlike conventional lenders, VA lenders don’t assess surcharges on cash-out refinancing. (See VA Refinance to learn more.)

No Loan Amount Limits — Sort Of

The VA loan program does not limit the property price or the loan amount. It does set a limit on the amount of the guaranty. In much of the country, the 2015 VA loan limit is $417,000 for 100 percent loans. In regions where property is more expensive, the limit is $625,500 for a single-family home. Borrowers with money for a down payment who wish to purchase a more expensive property may do so. (See VA Loan Limits to learn more.)

Cons

No Flexibility For Debtors or Defaults

If you had financial difficulty resulting in a judgment or lien, you may be out of luck. Also, you are ineligible for a VA loan if you have unpaid federal liens or judgments, defaulted on a government-backed loan or owe money to a government agency. As part of the approval process, VA lenders check the Credit Alert Interactive Voice Response System (CAIVRS) federal database that lists people with unresolved federal debt. Lenders will deny your loan if your name appears on CAIVRS.

Upfront Funding Fee

Borrowers must pay a VA funding fee. This can be paid out-of-pocket or wrapped into the loan, provided the resulting loan amount doesn’t exceed the lender’s limit. VA lenders impose the funding fee in place of mortgage insurance coverage. It doesn’t matter if your down payment is zero or more than 20 percent; you must pay the funding fee. (See VA Loan Fees to learn more.)

Condos Can Be More Difficult

Not all condominium purchases can be financed with VA home loans. You can learn if the condo is VA approved. The National Association of Realtors says 30 percent of condominiums are FHA approved, and even fewer are VA approved.

Only Loan Type Requiring a Clear Termite Report

If you want a VA home loan and your property is located in a designated “very heavy” or “moderate to heavy” termite infestation probability area, the VA will require a pest inspection, which typically costs several hundred dollars. An additional downside to this sticking point is that the VA does not allow buyers with VA loans to pay for the inspection — the seller or another party must pay for it.

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Seller Must Agree to Pay the VA Non-Allowables

A VA loan is inflexible in one aspect that may create roadblocks to your financing. You are not allowed to pay certain charges associated with financing your property. Most of these prohibitions kick in if your lender charges an origination fee and then tries to charge additional fees for origination-related services. Perhaps the most notable prohibition is the pest inspection. The VA may require a pest inspection but it won’t allow you to pay for it. Of course, this can be finessed by increasing the price of the home if you really want the property and the seller balks at paying for the inspection.

How VA Loans Work

The VA loan program is part of a benefits package granted to veterans by the Servicemen’s Readjustment Act. The VA reimburses lenders if veterans default on their VA home loans. Although the VA administers the program, the VA itself does not lend money. The VA lender guaranty, however, helps you by lessening the risk to lenders granting loans to veterans. As a result, VA loans are widely available at low cost.

Most veterans and active-duty service members, including those in the Army National Guard or Reserves, are eligible for the program. For eligibility, you need a Certificate of Eligibility (COE). Veterans must also have been honorably discharged. It’s easy to get your COE paperwork in order. The VA can access your service records and provide a COE almost instantly through an automated Internet-based application called Web LGY or Automated Certificate of Eligibility (ACE).

Web LGY is not available to the public, but your lender can order your COE for you. Alternatively, you can order your certificate through the VA benefits portal. If for some reason the VA’s online data is insufficient and cannot generate your COE, you’ll need to provide proof of your honorable discharge. You can do this using your DD-214 form. Once you’ve taken this additional step, you can have your lender retrieve your certificate, or you can file VA Form 26-1880 yourself.

Because the VA home loan is a valuable benefit for military personnel, offering unique advantages unavailable to non-VA borrowers, the requirements for eligibility are strict. Not understanding the elements that make VA loans different could hinder your mortgage approval and your home purchase. Here are four reasons why a VA mortgage may be your best financing option.

VA Loan Guaranty

The VA guarantees loans for buying, renovating or building homes. But according to the VA, most lenders don’t offer VA construction loans because they shun the risks and costs of construction disputes. If you are interested in a construction loan, you’ll find better luck looking elsewhere for the loan.

Buy, Build & Improve

Keep in mind a construction loan in a non-VA program will almost certainly require a down payment. However, once you’ve secured the loan, completed the construction and obtained a certificate of occupancy for the home, you can consider paying off the construction loan with a VA or other mortgage.

Certificate of Eligibility, Loan Limits, Down Payment

Obtain your COE to apply for a VA loan. The VA program does not set loan limits, although it does cap the amount of its guaranty. VA home loans often have lower interest rates than conventional or FHA mortgages because the government guaranty and VA underwriting guidelines reduce lenders’ risk. VA loans do not require a down payment.

VA IRRL Streamline Refinance

The VA offers a streamline refinance called the Interest Rate Reduction Refinance Loan (IRRRL). An IRRRL allows homeowners with VA loan mortgages to improve the terms of their mortgages without going through the entire underwriting process, saving time and money. Your income, credit rating and home equity are irrelevant because the VA isn’t deciding whether to back your loan — it already insures it.

No Appraisal, No Cost, No Cash-Out, No Occupancy

An IRRRL does not require an appraisal of your property. Nor does your property have to be your primary residence, although you must certify that it was your primary residence at one time. The VA already insures your loan, so changes in property value or use don’t increase your default risk. However, the VA does not allow a cash-out refinance, an increase in the loan amount for the purpose of taking cash out, or wrapping refinance costs into the new loan because these actions increase your risk of default.

Shop for the Best Deal on an IRRRL

You can approach any mortgage lender to give you an IRRRL. Since you are not required to refinance with your current lender or any other particular lender for an IRRRL, you can benefit from comparing the offers of several competing lenders. The only required fee for an IRRRL is a reduced funding fee of 0.5 percent of the loan amount. You’ll find that the costs of an IRRRL will vary among lenders. You’re able to get the best deal from comparison shopping because the government does not set VA mortgage loan rates. Conversely, be wary of a mortgage lender that claims to be the only lender that can process your VA streamline refinance. No one lender is required to process your IRRRL and in fact any VA lender can do the job.

VA Rate & Term or Cash-Out Refinance

Homeowners wishing to wrap the loan costs into their refinance or refinance a non-VA home loan to a VA mortgage can choose a rate and term refinance. Refinances with costs wrapped in are also called “limited cash-out” refinances because the new loan is larger than the payoff amount of the old loan, but no cash is released to the homeowner. If you choose a limited cash-out refinance, you must submit a complete application package. In this case, your lender will pull a credit report, verify income and order an appraisal.

Cash Out Via VA Refi

The application process is the same whether you wish to wrap the loan costs into a refinance or cash-out home equity. A full underwriting package and home appraisal are required in both situations. Unlike most other mortgage programs, the VA permits you to cash-out as much as 100 percent of your property value. Not every VA lender, however, goes along with the VA’s allowance. Many VA lenders limit the cash-out to 90 percent. If you desire a 100 percent cash-out, you may have to contact several lenders before you find one that will agree to do so.

Rate & Term or Cash-Out Refi Costs

Costs for rate and term or cash-out VA refinances are higher than those for IRRRLs. The IRRRL funding fee is 0.5 percent of the loan amount, and there is no appraisal fee. However, rate and term or cash-out refinances require appraisals, which can cost several hundred dollars. Rate and term and cash-out VA refinances also come with higher funding fees:

  • Regular military members using their eligibility for the first time: 2.15 percent
  • First-time users in the Guard or Reserves: 2.4 percent
  • Subsequent users: 3.3 percent
VA Native American Direct Loan (NADL)

The VA lends money directly to qualified Native American veterans through the Native American Direct Loan (NADL) program, which is not an insurance program. The VA sets the interest rate for these loans, and the only available program is a 30-year fixed-rate mortgage. Closing costs are low, and the funding fee is just 1.25 percent. Eligible veterans do not apply with private lenders — they go through their local VA Regional Loan Center.

MOU, Property on Federal Land

Property eligible for NADL financing must be located on federal trust land. Applicants eligible for financing must belong to a tribe that has entered into a Memorandum of Understanding (MOU) with the VA. The purpose of the MOU is to establish that the borrower’s governing body will grant the borrower ownership of the property, a lease for at least 44 years (which is the loan term plus 14) or a life estate.

30-Year Fixed, Build, Purchase or Improve a Home

You can use NADL loan mortgages to purchase, build or renovate houses. Unlike VA-guaranteed home loans, which must be approved by private lenders, NADL mortgages are actually funded by the government. For this reason, loans to build or renovate property are readily available. All NADL loans have 30-year terms and fixed interest rates at 4 percent since 2014; they vary when the VA believes market trends warrant a change.

VA Reverse Mortgage

The VA does not insure reverse mortgages. The only available government-backed reverse mortgage is the Home Equity Conversion Mortgage (HECM) program, which is administered by the Department of Housing and Urban Development (HUD) and funded by private lenders.

VA Loans’ Importance

The Servicemen’s Readjustment Act of 1944 provides several tools designed to help returning war veterans re-enter civilian life. The VA home loan guaranty program is one of its most important benefits. VA loans serve several simultaneous purposes: They make homeownership possible for millions of veterans; help service members establish credit, which they’d been unable to do while overseas; and aid the US economy’s transition from wartime production to peacetime activities.

VA LOANS BY THE NUMBERS
  • Homeownership among veterans79%
  • Homeownership among general population63%
  • VA loan market share in 20159%
  • FICO score for VA borrowers in 2015702
  • DTI for VA borrowers in 201539%
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Source: Ellie Mae Origination Insight Report 2015

In the beginning of the program, the amount of the guarantee was 50 percent of the loan amount but no more than $2,000. Mortgages were limited to a maximum of 20 years, and interest rates were capped at 4 percent. Over the years, iterations to the program have kept up with economic and social changes. Today, more than 20 million homes have been purchased with VA-guaranteed financing.

VA Market Share Growth

Source: Congressional Research Service

VA loans have been grabbing an increasingly larger share of the mortgage market as eligible veterans and service members recognize their advantages. Sure, FHA mortgages have become increasingly expensive, and conventional loans have remained hard to get. But a VA loan’s combination of lower costs, greater accessibility and better rates has proven a winner. Check out this VA mortgage snapshot to see how many families this program is helping today.

Total VA
LOANS IN 2015
totaling $153 billion
Largest VA
Purchase
Loan Lender
USAA Federal Savings Bank with $6.3 billion in 2015
Average VA Purchase Loan Amount
$243,997
Total VA Loans Insured
631,151

Source: U.S. Dept. of Veterans Affairs, Fiscal Year 2015

VA Housing Grants

The VA provides grants to veterans with permanent and service-connected disabilities so they can purchase or build adapted homes that enable them to live independently. These adapted housing grants may also be used to alter an existing home.

Specially Adapted Housing Grant

If you have a service-connected disability, you may find the Specially Adapted Housing (SAH) grant key to your day-to-day living. SAH grants help veterans with qualifying service-connected disabilities live independently in customized homes with accessibility features.

You can use SAH grants to:

  • Construct a specially adapted home on a new lot
  • Build specially adapted housing on land already owned
  • Remodel an existing home for specially adapted housing
  • Apply the grant against the unpaid principal mortgage balance of an adapted home already acquired without the assistance of a VA grant

The VA provides SAH grants of up to $70,465. You can apply online at the VA Veteran’s portal or by completing VA Form 26-4555, Veterans Application in Acquiring Specially Adapted Housing or Special Home Adaptation Grant and submitting it to your local VA Regional Loan Center.

Special Housing Adaptation Grant

Another grant that may prove useful if you have a service-connected disability is a Special Housing Adaptation (SHA) grant. The SHA grant helps veterans with qualifying service-connected disabilities to adapt or purchase homes to accommodate the disability.

You can use a SHA grant to:

  • Adapt a home already owned by you or a family member with whom you live
  • Adapt a home to be purchased by you or a family member (you must live in the home)
  • Purchase an adapted home

The VA provides SHA grants in amounts up to $14,093.

A temporary grant may be available to SAH- or SHA-eligible veterans and service members who are or will be residing in a home owned by a family member temporarily. The maximum SAH grant to modify a family member’s home is $30,934. The maximum SHA grant to modify a family member’s home is $5,523.

State Resources for Veterans

In addition to federal veterans’ programs, you may find some local options. States fund a variety of resources for veterans, including property tax reductions to qualified recipients. You can find a list of state property tax exemptions for veterans and the support states provide. State-provided housing aid for veterans also extends to assisting veterans who are students, homeless, disabled or low-income with rental vouchers or subsidized housing. Other programs offer home ownership assistance. Links to programs such as Cal Vet, California’s veteran assistance program, can be found on HUD’s State Information pages.

VA Loan Questions & Answers

Is a VA loan really the best option for a veteran?

The VA loan mortgage is usually the best option for eligible homebuyers with down payments of 10 percent or less. You should, however, compare your specific loans costs to determine the best deal for you. For example, a buyer with excellent credit and available funds for a 15 percent down payment could pay 0.85 percent for single premium mortgage insurance from a private mortgage insurer. Compare this to the VA funding fee of 1.25 percent for a loan with 10 percent down payment.

The lesson here: Remember to compare the whole package — interest rates, insurance and other costs — before deciding to use a VA loan or a conventional mortgage.

What are the VA loan limits?

The VA mortgage program imposes no loan limits. However, the VA caps the amount of its guarantee, and most lenders won’t lend more than four times that amount. In much of the country, VA lenders max out their loan amounts at $417,000, and in more expensive areas they’ll fund 100 percent of loans up to $625,500. However, those who wish to purchase more expensive properties with VA mortgages can make a down payment equal to 25 percent of the difference between the home’s purchase price and the maximum loan size. For instance, if you wish to purchase a $725,500 property in Silicon Valley, your down payment would be $25,000. That’s 25 percent of the difference between $725,500 and $625,500 — a down payment of just 3.45 percent.

Are VA loans cheaper than conventional loans?

Often, but not always. VA loans can be cheaper than conventional loans. However, neither conventional nor VA loan rates and fees are dictated by the government. The only required fee in a VA mortgage loan is the VA funding fee. Most mortgage programs have additional costs such as title insurance, escrow charges, and origination fees. The best thing you can do, regardless of the type of loan you choose, is to obtain offers from several lenders for both VA and conventional loans. Only a side-by-side comparison will reveal the cheaper loan.

How long does it take to close on a VA loan?

VA loans close on average in 39 days, according to Ellie Mae. Your closing time depends on several factors, such as your lender’s efficiency, the current market’s demand for mortgages, the purpose of your loan and your preparation and response to lender requests. When rates drop and the volume of refinance applications swells, lenders get busy and processing times grow longer. Loans for home purchases receive higher priority from lenders than refinance loans; parties in a home purchase are motivated to meet the scheduling terms of the sales contract. If you’re well prepared — with your tax returns, W-2s, pay stubs, and bank, retirement and investment account statements — and you’ve checked your credit report and corrected significant errors, you should close within 30 days or so.

Is it harder to buy a house if I use a VA loan?

Possibly. If you’re dealing with a very hot market with a lot of competition from buyers, you may find that it’s more difficult. However, you can eliminate many seller’s objections by getting pre-approved for your loan before you go home shopping.

In a normal market, buying usually isn’t more difficult unless the house is in very poor condition, located in an area prone to termite damage, or part of a condominium project or planned unit development that is not VA approved. VA limits borrowers’ allowable fees, although very few VA lenders charge these fees anyway. In fact, buying with a VA loan can be a simpler process because it doesn’t require a down payment and qualifying for financing is easier.

Where do I start if I want a VA loan?

Start by requesting mortgage quotes from several VA lenders. Compare them and contact a few with the most competitive offers. Your lender can probably obtain your COE for you directly from the VA’s web-based application in seconds. At that point, you can proceed with your application and obtain pre-approval for your purchase. With a pre-approval letter, you’re practically viewed as a cash buyer and should command plenty of respect from home sellers.

Can I qualify for a VA loan with bad credit?

Yes. The VA loan program has no minimum credit score requirement. Data from February 2015 show the average FICO score of approved VA borrowers was 52 points lower than those of conventional borrowers (702 vs 754) for that month. However, this does not mean VA insurance is a sub-prime loan program. The VA’s underwriting guidelines state that your credit is considered satisfactory if you have made payments for 12 months after the resolution of a derogatory on your credit report, provided you are not in bankruptcy.

Updated: July 28, 2017