The Ultimate Guide to VA Loans
Everything You Need to Know about VA Loans
For U.S. veterans, active-duty service members, and eligible military spouses, VA loans offer one of the most powerful paths to homeownership. With benefits like $0 down payment, no private mortgage insurance (PMI), and competitive interest rates, VA loans make buying a home more affordable than conventional mortgages.
When securing a VA loan, choosing the right title and escrow company is crucial for a smooth and efficient closing process. Federal Title & Escrow specializes in VA loan transactions, ensuring that military homebuyers experience a hassle-free settlement.
In this comprehensive guide, we’ll cover:
- What a VA loan is and who qualifies
- VA loan limits and the different types of VA loans available
- Property requirements
- The VA funding fee and exemptions
- Step-by-step process to secure a VA loan
- Lesser known facts for Realtors and Lenders
What Is a VA Loan?
A VA loan is a mortgage backed by the U.S. Department of Veterans Affairs (VA) and was designed to help veterans and service members buy, build, or refinance a home with no down payment and no private mortgage insurance (PMI). VA loans are offered by private lenders (banks, credit unions, mortgage companies) but guaranteed by the VA.
Key Benefits of a VA Loan:
- $0 Down Payment(in most cases)
- No PMI(unlike conventional loans with less than 20% down)
- Lower Interest Rates(compared to conventional loans)
- Easier Credit Qualifications(more lenient than FHA or conventional loans)
- Limited Closing Costs (some closing fees are capped)
- Loan Assumption Option(future buyers can take over your loan under certain conditions)
- No Prepayment Penalty(pay off your mortgage early without fees)
- Rate Refinancing with little to no cost out-of-pocket (costs can be rolled into the loan)
Who Is Eligible for a VA Loan?
To qualify, you must meet one of the following service requirements:
Service Requirements:
- Active-Duty Service Members:
- At least 90 consecutive days during wartime
- 181 days during peacetime
- Veterans:
- Minimum 24 months of service (or full active-duty period if less)
- National Guard/Reserves:
- 6 years of service (or less if discharged for a service-related disability)
- Spouses of Service Members:
- Eligible if the veteran is MIA, POW, or died in service (or from a service-related condition) and not remarried before the age of 57
How to Prove Eligibility
You’ll need a Certificate of Eligibility (COE), which you can get through:
- The VA’s eBenefits portal
- Your lender (many can pull it for you)
- Mail-in application (VA Form 26-1880)
VA Loan Limits (2024 Update)
- No maximum loan limit for borrowers with full entitlement (meaning you can borrow as much as a lender approves based on income and credit). If you’ve used your VA loan before and still owe on it, there may be limits (check current VA guidelines).
- VA loan entitlement is the dollar amount the Department of Veterans Affairs will guarantee on each VA home loan and helps determine how much a veteran can borrow before needing a down payment. VA loan entitlement is typically either $36,000 or 25% of the loan amount up to the conforming loan limit.
- VA bonus entitlement, also known as secondary and second-tier entitlement, is what comes into play for loan amounts over $144,000. Bonus entitlement also allows qualified Veterans to have multiple VA loans at once.
Types of VA Loans
VA loans aren’t just for home purchases—they can also help you refinance, build, or access home equity.
Property Requirements
VA loans have specific rules about the type of home you can buy:
Primary Residence Only
- No investment properties or vacation homes.
- Can be a single-family home, condo, multi-unit property (up to 4 units), or manufactured home (if on a permanent foundation).
VA Minimum Property Requirements (MPRs)
The home must pass a VA Appraisal, which requires:
- Safe, sound, and sanitary (no major structural issues).
- Move-in ready (no fixer-uppers unless using a VA renovation loan).
- Free of pest damage (termite inspection may be required).
Condos & Multi-Unit Homes
- Must be in a VA-approved condo complex (or go through the approval process).
- Multi-unit properties (2-4 units) are allowed if you live in one unit.
The VA Loan Funding Fee
A one-time fee that helps fund the VA loan program and can be added to your loan payment.
Funding Fee Rates (2024)
| Loan Type | First Use | Subsequent Use |
| Purchase Loan (0% down) | 2.15% | 3.3% |
| Purchase Loan (5-10% down) | 1.5% | 1.5% |
| IRRRL Refinance | 0.5% | 0.5% |
| Cash-Out Refinance | 2.15% | 3.3% |
Who Is Exempt?
- Veterans with a 10%+ disability rating
- Purple Heart recipients
- Surviving spouses of veterans who died in service
7. Steps to Get a VA Loan
- Check Eligibility(get your COE).
- Find a VA-Approved Lender(compare rates & fees).
- Get Pre-Approved(strengthens your offer).
- House Hunt(look for VA-approved properties).
- Make an Offer(sellers may pay some closing costs).
- VA Appraisal & Underwriting(ensures the home meets VA standards).
- Close & Move In!
Lesser known facts for Realtors and Lenders
- No Signed Lease Required: VA loans only require a letter from a realtor stating the rent a prior home could
- Processing Time: If two unmarried veterans are purchasing a home together, the loan may take an 2-4 extra weeks to process, as such loans must be sent directly to the VA for approval.
- Wholly Noncontingent Offers are Possible: A VA Escape Clause addendum can be signed at Settlement and does not need to be signed before.
- Childcare Costs Included: VA loans analyze childcare costs for loan qualification.
- Seller Concessions: VA allows sizable concessions, equal to 4% of the purchase price over and above all closing costs.
- Excess Seller Concessions: If actual closing costs are less than seller concessions, the VA allows unused seller concessions to be used (at closing) to pay down a buyer’s other debts, such as a car loan or credit card balances.
- Funding Fee Refund:A veteran buyer not yet approved for a service-connected disability by VA may be eligible for a funding fee refund.
- Taking Occupancy: VA allows the Buyer to take occupancy up to a year after closing.
- Refinances: VA requires almost no documentation to refinance and the VA loan can be refinanced as early as 210 days after purchase. A veteran can even refinance a home with VA financing where the veteran no longer lives.
