VA Loans – The Complete Guide for 2020

VA loans are the most significant benefit provided to our Nation’s Veterans.

Zero down payment, and no mortgage insurance.

In this article, we’re going to cover everything there is to know about VA loans.

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What is a VA Loan?

Private VA-approved lenders offer VA loans which are guaranteed by the U.S. Department of Veterans Affairs. They have a wealth of benefits including a zero down payment and no mortgage interest requirement. 

How Do VA Loans Work?

  • A VA home loan is a mortgage that is guaranteed by the U.S. Department of Veterans Affairs
  • The VA does not issue loans they are issued by private lenders
  • Zero down payment, you can finance 100% of the price of the home
  • Military service persons and their spouses may be eligible
  • Mortgage insurance premiums (PMI) is not required
  • VA funding fee of 2.15% for first-time buyers or 3.3% for repeat buyers is needed

Check Current VA Loan Rates

VA Service Requirements

  • You have served 3 months of active service during wartime, OR
  • 6 months of active service during peacetime, OR
  • 6 years of service in the Reserves or National Guard, OR
  • Spouses of service members who died in the line of duty or as a result of a service-related disability

VA Loan Eligibility

  • 90 days of consecutive active duty service
  • More than 180 days of active duty service during peacetime
  • Six or more years in the National Guard or Reserves
  • Active-duty Military
  • Cadets of the U.S. Military, Coast Guard Academy, or Air Force
  • U.S. Naval Academy Midshipmen
  • Atmospheric and National Oceanic Administration officers
  • U.S. Public Health Service officers

* VA loans are not available to Dishonorably discharged veterans

VA Credit Requirements

  • 620 or higher credit score (Some lenders offer poor credit VA loans with a 580 score or lower)
  • No more than one late payment in the past 12 months
  • No bankruptcies, foreclosures, or short sales in the past 36 months
  • No mortgage rates in the past six months

VA loans technically don’t have a minimum credit score. The Department of Veterans Affairs will guarantee a mortgage loan regardless of the borrower’s FICO scores.

Lenders often set their minimum credit requirements. Some lenders require a minimum 620 credit score to be eligible. However, some VA lenders can work with a credit score as low as 500.

Lenders will look at more than just your FICO score. They take into account your entire credit history.

If you have a credit score below 580, it’s highly recommended that you improve your credit score before applying.

Or if you have at least a 10% down payment, you may qualify for an FHA loan with a credit score as low as 500.

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VA Loan Benefits

  • No down payment
  • No mortgage insurance premium (MIP)
  • Low credit scores may be approved
  • Flexible requirements
  • A lower rate than conventional loans
  • Higher debt-to-income ratios accepted
  • VA negotiates with the lender if you are facing foreclosure
  • Higher loan limits than FHA loans
  • The seller can pay 6% of closing costs
  • Fixed-rate and adjustable-rate loan terms

VA home loan infographic

First-time Homebuyers

Veterans that are also first-time homebuyers appreciate the fact that there are zero down payment and no mortgage insurance.

However, these loans are not just for first-time buyers, and veterans can use a VA home loan multiple times throughout their lifetime.

VA Entitlement

VA entitlement is a figure that shows how much you are able to qualify for.

If you’re a basic entitlement will be enough to qualify for a $510,400 loan or higher in certain high-cost areas.

You need to speak to a VA lender to find out how much of an entitlement you qualify for.

VA Funding Fee

Because the VA loan program doesn’t require mortgage insurance, in order to help fund the VA program, there is a one time VA funding fee.

The funding fee amount will depend on the amount of the loan, and whether or not you’re using a down payment.

It needs to be paid at closing, and you may be able to roll the funding fee into the loan and finance it.

Funding fee not required if you are:

  • Receiving VA payments for a service-connected disability, OR
  • A veteran who would be entitled to receive compensation or if didn’t receive retirement or active duty pay, OR
  • Are a surviving spouse of a Veteran who died in service

VA Funding Fee Chart

Regular Military
Down payment Fee (first-time buyer) Fee (subsequent use)
0% 2.15 percent 3.3 percent
5-10% 1.5 percent 1.5 percent
10%+ 1.25 percent 1.25 percent

National Guard and Reserves and Chart

Reserve & National Guard Personnel
Down payment Fee (first-time buyer) Fee (subsequent use)
0% 2.4 percent 3.3 percent
5-10% 1.75 percent 1.75 percent
10%+ 1.5 percent 1.5 percent

VA IRRL (Cash-out refinance) Chart

VA funding fee for IRRL’s (VA cash-out refinance) is the same for all military personal weather Reserves, Regular Military, or National Guards.

All Military Personnel, National Guard, and Reserves
Loan type Fee (first-time buyer) Fee (subsequent use)
IRRL’s 0.50 percent 0.50 percent
Manufactured Home Loans 1.00 percent 1.00 percent
Loan Assumptions 0.50 percent 0.50 percent

VA Certificate of Eligibility

In order to receive a VA-insured mortgage loan, you must have a certificate of eligibility from the Dept. of Veterans Affairs.

Your mortgage lender can get one on your behalf, or you can visit the VA website to receive your certificate.

Qualifying Income

  • W2 Income
  • Overtime and bonus pay
  • Seasonal positions
  • Part-time income
  • Income from a second job
  • LES income
  • Child support
  • Self-employed income

Non-Qualifying Income

  • lottery winnings
  • gambling income
  • Unemployment benefits
  • All one-time income payments
  • inconsistent sources of income
  • Single bonus payment
  • Income from investment properties

VA Streamline Refinance

With a VA mortgage loan, you may qualify to refinance your mortgage using a streamline refinance to reduce your interest rate and lower your monthly payment.

A 210 days after closing, you are eligible to refinance your VA loan.

VA streamline refinance loans are quick and easy.

It must have a net tangible benefit in order to close. You must be able to reduce your interest or lower your payments by at least 5% to qualify.

Check and Compare VA Loan Rates

VA Loan Limits

The VA loan limit in low-cost areas of the country has been increased to $510,400 in low-cost areas, and up to $765,600 in high-cost areas of the country.

High-cost areas of the country include cities such as San Fransisco, Los Angeles or Denver.

If you are seeking a loan for a home priced above the loan limit, you must get a jumbo VA loan.

You can check VA loan limits in your county here.

VA Jumbo Loans

If you’re seeking a loan to buy a home that exceeds the loan limit in your area, you may be able to get a VA jumbo loan.

You will need to pay 25 percent of the amount over the loan limit.

For example, if you lived in a low-cost area like Dallas, where the loan limit is $453,100.

And you wanted to buy a home that costs $553,100, which is $100,000 over the limit.

You will need to pay 25% of $100,000. So you will have a down payment of $25,000.

Debt-to-Income Ratio

The Department of Veteran Affairs does not state a maximum debt-to-income ratio (DTI ratio).

However, lenders typically want to see a DTI ratio at or below 50%. 50% is not a hard cap, and these are certain situations in which a lender will allow higher debt-to-income ratios.

Strong compensating factors for high DTI ratio

  • A loan-to-value ratio below 95%
  • High net worth
  • A large amount of cash in reserves
  • No payment shock
  • High income
  • Good credit score

In Conclusion

The VA home loan program offers a wealth of benefits for many home buyers.

They are easier to qualify for than conventional loans and have lower interest rates.

They are great for all Veterans, especially first-time homebuyers, because they offer zero down payment and no mortgage insurance, making them the cheapest mortgage available.

Do you think you’re ready to buy a new home using your VA benefits?

Get Approved for a Home Loan Today


Is there a minimum credit score for a VA loan?

While technically there is no minimum credit score the VA requires, lenders set their own credit requirements, usually between 580-640. Some lenders may be able to accept credit scores lower than 580.

How many times can you use a VA home loan?

One of the great benefits of VA loans is that Veterans may use them for life. In some cases, you may be able to have two VA loans at the same time; however, there are restrictions.