VA Loan Basics: What Every Veteran Should Know
The VA home loan is one of the most powerful homeownership benefits available to those who have served. Yet many eligible veterans, active-duty service members, and surviving spouses either do not know about it or misunderstand how it works. This article walks through the core features so you can make informed decisions about your home purchase.
Who Is Eligible and How to Prove It
VA loan eligibility generally requires 90 consecutive days of active service during wartime, 181 days during peacetime, or six years in the National Guard or Reserves. Surviving spouses of veterans who died in the line of duty or from a service-connected disability may also qualify. To prove eligibility, you need a Certificate of Eligibility (COE), which you can request through the VA's eBenefits portal, by mail using VA Form 26-1880, or through your lender — most lenders can pull it electronically in minutes. Your COE shows how much entitlement you have available, which directly affects how much you can borrow without a down payment.
Zero Down Payment and No PMI
The two headline benefits of a VA loan are straightforward: you can finance 100 percent of the home's value with no down payment, and you are never required to pay private mortgage insurance (PMI). On a conventional loan, putting less than 20 percent down typically means paying PMI of $100 to $300 or more per month, depending on your loan amount. Over the life of a loan, eliminating PMI can save tens of thousands of dollars. The zero-down feature also means you can buy sooner instead of spending years saving for a down payment, which matters when home prices are rising.
The VA Funding Fee Explained
The VA does not charge monthly mortgage insurance, but it does charge a one-time funding fee that helps sustain the loan program. For first-time VA loan users putting zero down, the funding fee is currently 2.15 percent of the loan amount. On a $300,000 loan, that is $6,450. The fee drops to 1.25 percent if you put at least 5 percent down, and to 1 percent with 10 percent or more down. Veterans receiving VA disability compensation are exempt from the funding fee entirely, which is a significant savings. The fee can be rolled into the loan so you do not have to pay it out of pocket at closing, though that does increase your total loan balance.
Other Key VA Loan Features
VA loans come with additional protections that many buyers overlook. There is no prepayment penalty, so you can pay off the loan early or make extra payments without fees. VA loans also have limits on what the lender can charge in closing costs, protecting you from excessive fees. If you run into financial trouble, the VA offers foreclosure avoidance assistance that is not available with conventional loans. Interest rates on VA loans also tend to be lower than conventional rates because the government guarantee reduces lender risk.
Key Takeaways
- ✓You can get your Certificate of Eligibility online, by mail, or through your lender in minutes
- ✓Zero down and no PMI can save you tens of thousands of dollars over the life of your loan
- ✓The funding fee is a one-time cost (often 2.15%) that can be rolled into the loan, and it is waived entirely for veterans with service-connected disabilities
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