VA loan

A mortgage guaranteed by the U.S. Department of Veterans Affairs for eligible service members, veterans and some surviving spouses.

What it means

VA loans are made by private lenders and partly guaranteed by the Department of Veterans Affairs. Eligibility depends on length and type of military service; qualifying borrowers obtain a certificate of eligibility. Eligible borrowers can buy a primary home with no down payment, and there is no monthly mortgage insurance.

Most borrowers pay a one-time VA funding fee, which can be rolled into the loan and varies with down payment and prior VA loan use. Some borrowers, such as many veterans receiving VA disability compensation, are exempt. Lenders still review credit and income, and the home must be a primary residence.

Example

For example, an eligible veteran buys a $300,000 home with nothing down. At an illustrative 6% for 30 years, principal and interest is about $1,798.65 a month, plus the funding fee if it is financed, but no monthly mortgage insurance.

How it’s used

Active-duty members and veterans buying a primary home
Buyers with little cash for a down payment
Refinancing an existing VA loan

Strengths and weaknesses

Strengths

No down payment required for eligible borrowers
No monthly mortgage insurance
Rates are often competitive

Weaknesses

Funding fee adds to the cost for most borrowers
Limited to eligible borrowers and primary residences
Zero down means little equity at the start

Educational information only, not financial, tax or legal advice. Rules, limits and rates change; check the IRS, your lender or plan, or a qualified professional before acting.