Reviewed by the Editorial Team · Updated October 18, 2026 · 9 min read
A VA loan is a mortgage from a private lender that the Department of Veterans Affairs partly guarantees, open to eligible veterans, service members and some surviving spouses. It allows zero down and no monthly mortgage insurance; most borrowers pay a one-time funding fee instead, 2.15% on a first use with nothing down.
Key takeaways
A VA loan is a lender-issued mortgage the VA partly guarantees, allowing zero down and no monthly mortgage insurance for eligible veterans, service members and some surviving spouses.
A one-time funding fee replaces mortgage insurance: 2.15% on a first use with nothing down ($8,600 on a $400,000 home), 3.30% on a later use, and 1.25% with 10% down.
At 6.71%, financing the first-use fee lifts the payment to $2,639, against $2,584 for a borrower who is exempt from the fee.
VA sets no minimum credit score and lenders often want about 620, but they check a debt ratio near 41% and VA's residual-income test, and the home must be your primary residence.
Down payment
None required
Monthly mortgage insurance
None — a one-time funding fee instead
Funding fee, first use
2.15% with nothing down
Credit score
No VA minimum; lenders often want 620
VA 30-year average6.71%Optimal Blue OBMMI · Nov 5, 2026.
VA approval rate83%560,693 loans originated · HMDA 2025.
Funding fee, first use, 0% down$8,600On a $400,000 home — 2.15% of the loan. Every scenario ↓
How a VA loan works
A VA loan is a mortgage from a private lender that the Department of Veterans Affairs partly guarantees. The guarantee protects the lender if you default, which is why it can accept no down payment and charge no monthly mortgage insurance.
Lender: a private bank or mortgage company, not the VA
Down payment: none required, though a larger one lowers the funding fee
Mortgage insurance: none monthly, replaced by a one-time funding fee
Eligibility: a Certificate of Eligibility (COE) proves your service
Two reviews apply. The VA confirms your service and sets property standards, then the lender underwrites your credit, income and debts like any other borrower, with a residual-income check added on top.
Getting your Certificate of Eligibility
Your lender can often pull the COE within minutes, or you can request it online or by mail. Service minimums vary by era and component, but generally mean 90 days of wartime or 181 days of peacetime active duty, or six years in the Guard or Reserve.
How much you can borrow
Since 2020, borrowers with full entitlement face no VA loan limit, so the lender's review of your income, debts and credit sets the amount. Partial entitlement, usually because another VA loan is still open, brings county loan limits back into play.
How your entitlement affects loan size
How much you can borrow
Your entitlement
VA loan limit
What sets the amount
Full entitlement
None
Your income, debts, credit and residual income
Partial entitlement
County limit applies to the VA guaranty
The same review; amounts above the limit may need a down payment
What a VA loan really costs
VA loans skip monthly mortgage insurance, but most borrowers pay a one-time funding fee, usually financed into the loan. The table prices a $400,000 home at 6.71%, the average VA rate as of Nov 5, 2026; see current VA rates for today's figure.
Worked exampleVA funding fee on a $400,000 home at 6.71%
What a VA loan really costs
Scenario
Fee
Fee amount
Loanfee financed
P&I
No down payment, first use
2.15%
$8,600
$408,600
$2,639
No down payment, later use
3.30%
$13,200
$413,200
$2,669
5% down
1.50%
$5,700
$385,700
$2,491
10% down
1.25%
$4,500
$364,500
$2,354
Exempt (service-connected disability)
0%
$0
$400,000
$2,584
Funding fee, first use, 0% down$8,600paid at closing or rolled into the loan — it replaces monthly mortgage insurance
Exempt veterans pay$55 lessper month than a first-time 0%-down buyer who finances the fee
Rate: Optimal Blue OBMMI VA 30-year average 6.71% (Nov 5, 2026). Funding fee rates from VA's 2026 purchase chart. Taxes, insurance and any HOA dues are extra; VA loans carry no monthly mortgage insurance. Run the VA calculator
With nothing down, the 2.15% first-use fee is $8,600. Financed, it lifts the loan to $408,600 and the payment to $2,639. On a later use, the 3.30% fee is $13,200 and the payment $2,669.
A down payment helps twice, by shrinking the fee and the loan. Putting 5% down ($20,000) cuts the fee to 1.50% and the payment to $2,491; 10% down ($40,000) cuts them to 1.25% and $2,354. These rates apply to first and later use alike.
Exempt from the fee
Exempt borrowers owe no funding fee, so a $400,000 loan costs $2,584 a month instead of $2,639: $55 less than a first-use buyer who finances the fee, plus $8,600 saved at closing. Veterans who receive VA disability compensation are the main group exempt.
What financing the fee hides
A financed fee is borrowed money: it accrues interest for the full term and raises your starting balance. Other costs sit outside the fee chart, which the VA funding fee reference covers in full, including refinance rows.
Interest on the fee: a financed fee costs more than its face amount
Slower equity: a financed fee puts the balance above the purchase price
Closing costs: title, appraisal and lender fees, though VA bars some charges
Taxes and insurance: still part of your monthly housing payment
When a VA loan goes wrong
VA loans have fewer cost traps than most, but some rules bite only after you've picked a home. Four are worth checking before you make an offer:
Higher repeat fee: 3.30% on a later use with nothing down
Residual income: you can pass the debt ratio and still be declined
Appraisal repairs: minimum property requirements can force fixes before closing
Tied-up entitlement: used until payoff, or until a veteran buyer assumes the loan
The VA Lenders Handbook (chapter 4) adds a residual-income test to the debt ratio: income left each month after taxes, housing costs, debts and upkeep must clear a guideline set by region and family size. A 41% ratio is a benchmark, and strong residual income can justify a higher one.
Before you make an offer
Ask your lender for a residual-income estimate before you shop, and check your COE for remaining entitlement if a VA loan is still open. Then walk the home with an inspector, since the VA appraiser will flag roof, heating, water and safety defects, and put repair terms in the contract.
VA loan vs. FHA vs. conventional
Eligible borrowers can usually choose among all three, so the useful comparison is what each costs upfront and every month.
Three ways to buy with little down
VA loan vs. FHA vs. conventional
VA loan
FHA loan
Conventional loan
Down payment
None required
3.5% minimum
As little as 3%
Upfront cost
Funding fee, 2.15% on a first use with nothing down
Upfront mortgage insurance, 1.75% of the loan
Lender and closing costs; no insurance charge upfront
Monthly mortgage insurance
None
0.55% a year, for the loan's life if under 10% down
PMI at about 0.46%–1.5% a year under 20% down; it cancels
Minimum credit score
No VA minimum; lenders often want 620
580 with 3.5% down
620 at most lenders
Who's eligible
Veterans, service members, some surviving spouses
Any qualified buyer
Any qualified buyer
Fits best
Eligible buyers short on cash who want no monthly insurance
Buyers with lower scores who aren't VA-eligible
Buyers with strong credit and a larger down payment
Where you qualify for both, VA's missing mortgage insurance usually gives it the lower monthly cost, while FHA is the fallback when VA rules don't fit. For a full cost comparison against a conventional loan, read the VA vs. conventional guide.
Who a VA loan fits
A VA loan fits eligible borrowers who will live in the home and have steadier income than savings. It finances a primary residence only, not a vacation home or a pure rental.
Veterans, service members, and Guard or Reserve members with a COE
Buyers with solid income but little cash for a down payment
Borrowers who want to avoid monthly mortgage insurance
Owner-occupants of a home with one to four units
Skip it if you'll rent the home out or use it seasonally, which VA rules don't allow. Weigh it carefully too if the property needs major repairs, since the VA appraisal can hold up closing until they're done.
VA loans: pros and cons
Pros
Nothing down for eligible borrowers
No monthly mortgage insurance at any down payment
No VA-set minimum credit score
Assumable by approved buyers
Cons
Funding fee, higher on a later use with nothing down
Primary residence only
VA appraisal can require repairs before closing
Entitlement stays tied up while the loan is open
What VA lenders check
VA sets no minimum credit score, so each lender sets its own, and many want about 620. Most also work from VA's 41% debt-to-income benchmark, then run the residual-income test, which can support a higher ratio when money left each month is strong.
The ratio is only part of the test, so estimate yours before you apply. Add the full housing payment to your monthly debts and compare the total with income in the home affordability calculator. A steady employment record and some cash reserves help the file.
Already own a home? A VA cash-out refinance can turn up to 100% of its value into cash, replacing a VA or non-VA mortgage, with a funding fee of 2.15% on first use.
Requirements at a glance
Certificate of Eligibility confirming qualifying service and a discharge other than dishonorable
No VA-set minimum credit score; many lenders look for about 620
Debt-to-income ratio near 41%, with room to go higher when residual income is strong
Residual income above VA's guideline for your region and family size
A primary residence you will occupy, not a vacation home or rental
VA appraisal confirming value and minimum property requirements
A VA loan is a mortgage from a private lender that the Department of Veterans Affairs partly guarantees, for eligible veterans, service members and some surviving spouses. The guarantee lets lenders accept no down payment and skip monthly mortgage insurance.
You prove eligibility with a Certificate of Eligibility, then qualify on credit, income and residual income.
How do I qualify for a VA loan?
You need two approvals. The VA confirms your service through a Certificate of Eligibility, and a VA-approved lender then reviews your credit, income, debts and residual income.
VA sets no minimum credit score, though many lenders want about 620, and the home must be your primary residence and pass a VA appraisal.
What are the downfalls of a VA loan?
The main downsides are the funding fee (2.15% on a first use with nothing down, 3.30% on a later use), the primary-residence rule and a VA appraisal that can require repairs.
Using the loan also ties up part of your entitlement until it's paid off, which can limit a second VA purchase.
What disqualifies you from a VA loan?
A dishonorable discharge or too little qualifying service closes the benefit itself. Beyond that, a lender can decline you for weak credit, too much debt or residual income below VA's guideline for your region and family size, and a home that fails the VA appraisal's minimum property requirements can stop a purchase.
Is a VA loan actually worth it?
Usually, yes, for eligible buyers who would otherwise pay mortgage insurance. You can buy with nothing down, and the one-time funding fee ($8,600 on a $400,000 first-use loan) replaces years of premiums.
With 20% or more down, compare both, since a conventional loan then has no PMI and no funding fee.
How much do I need to make to buy a $400k house with a VA loan?
There's no set income, because lenders test ratios rather than a salary. They add your full housing payment to monthly debts and divide by gross income, aiming near 41%, then apply VA's residual-income test by region and family size. Principal and interest alone are $2,639 with nothing down and the fee financed.
Is there a minimum credit score for a VA loan?
No. The VA sets no minimum credit score, but lenders set their own, and many want about 620. Some accept lower scores when income and residual income are strong.
A weaker score can mean a higher rate, so compare several VA-approved lenders, since their standards differ.
Who is exempt from the VA funding fee?
Veterans who receive VA compensation for a service-connected disability are exempt, as are some who qualify for it but receive retirement or active-duty pay, and surviving spouses who receive Dependency and Indemnity Compensation.
On a $400,000 first-use loan, that avoids $8,600 and cuts the payment by $55 a month.
Is there a VA loan limit?
Not for most borrowers. Since 2020, veterans with full entitlement face no VA loan limit, so the lender's income and credit review sets the amount.
With partial entitlement, such as an open VA loan, county loan limits cap the VA guaranty, and a larger loan may require a down payment.
Can you use a VA loan more than once?
Yes, the benefit is reusable. You can use it again after paying off the loan and selling the home, once more by paying it off and keeping the home, or with remaining entitlement while the first loan is open. Later use with nothing down carries the higher 3.30% fee.
This guide is general information, not a lending decision. Program rules and dollar limits change — verify current figures with a licensed lender and confirm licensing at NMLS Consumer Access. See all loan types.
Nothing matches that. Try “refinance”, “FHA”, “Texas”, “Rocket” or “PMI”.