What is a VA Loan?

A VA loan is guaranteed by the U.S. Department of Veterans Affairs. While the government doesn’t issue the loan directly, its backing reduces risk for lenders. As a result, VA loans often require no down payment and may offer looser credit standards than conventional loans.

How Does a VA Loan Work?

The VA loan process functions similarly to other conventional loans. Lenders will review:

• Current and past employment history
• Credit score
• Desired loan amount
• Gross monthly income
• Assets (bank accounts, retirement savings, etc.)
• Debts (credit cards, delinquencies, etc.)
• Previous homeownership

Lenders use this information to calculate the debt-to-income (DTI) ratio. Most lenders prefer a DTI ratio of 41% or lower, although requirements may vary.

Key Benefits of VA Loans

• No down payment required (unless specified by lender or purchase exceeds VA limits)
• Competitive interest rates
• No prepayment penalties
• No monthly mortgage insurance required
• Appraisal ordered by the VA to confirm fair market value
• Assistance with home repairs if major defects are found
• Loans are assumable (with lender approval)
• Seller can cover all closing costs and up to 4% in concessions
• Foreclosure is used as a last resort

VA Loan vs. FHA Loan

• VA loans require no down payment; FHA requires a minimum of 3.5%
• VA loans do not require monthly mortgage insurance; FHA loans do
• VA loans often have lower interest rates than FHA or conventional loans

VA Loan Eligibility Requirements

To qualify for a VA loan, the applicant must meet the following conditions:

• Be an eligible veteran or service member with valid proof of service
• Use the loan for an eligible purpose (typically to buy, build, or refinance a primary residence)
• Occupy the home as a primary residence
• Have satisfactory credit history
• Have stable, sufficient income to manage mortgage and home expenses

Debt-to-Income (DTI) Ratio

Lenders evaluate your DTI ratio using your gross monthly income and current monthly debts. While 41% is the typical benchmark, this may vary by lender. Confirm with your lender what DTI threshold they require.

VA Loan Appraisal

An appraisal is required for VA loans to ensure the home’s value aligns with market standards and is in good condition. A licensed VA appraiser will inspect the property and submit a detailed report. While the VA ensures the loan, it does not guarantee the home's condition—any needed repairs are the responsibility of the buyer.

Who is Eligible for a VA Loan?

• Most veterans, active-duty service members, reservists, and National Guard members
• Spouses of service members who died on active duty or as a result of service-related injuries

Need Help with a VA Loan?

If you’re interested in applying for a VA loan or have questions about your eligibility, please reach out using the contact information below.