The Strongest Loan Program in the United States
A VA loan, guaranteed by the Department of Veterans Affairs, offers terms no conventional lender matches: no down payment, no mortgage insurance at any loan-to-value, competitive rates, and no prepayment penalty. For an eligible borrower, it is almost always the cheapest available financing.
The trade is a one-time funding fee, which exists to keep the program self-sustaining rather than taxpayer-funded.
VA Funding Fee Chart
| Down payment | First use | Subsequent use |
|---|---|---|
| Less than 5% | 2.15% | 3.30% |
| 5% to 9.99% | 1.50% | 1.50% |
| 10% or more | 1.25% | 1.25% |
| Exempt | 0% | 0% |
Veterans receiving compensation for a service-connected disability, those eligible to receive it, and surviving spouses of veterans who died in service or from a service-connected disability pay no funding fee at all. The fee is normally financed into the loan rather than paid at closing.
No Mortgage Insurance Is the Real Saving
On a $400,000 loan, conventional PMI at 0.6% costs about $200 a month until 20% equity is reached — roughly $19,000 over eight years. FHA is worse, charging for the life of the loan at low down payments. The VA funding fee on the same loan is a one-time $8,600, financed at the mortgage rate. Over any realistic holding period the VA loan wins comfortably.
Eligibility and Entitlement
Eligibility comes from service: generally 90 continuous days during wartime, 181 days during peacetime, six years in the National Guard or Reserves, or being the surviving spouse of a service member who died in the line of duty. A Certificate of Eligibility from the VA confirms it.
Entitlement can be restored after a VA loan is repaid and, since 2020, there is no loan limit for borrowers with full entitlement — the lender's own underwriting becomes the only ceiling.
Requirements That Do Apply
- Primary residence only. No investment properties, though multi-unit homes qualify if you occupy one unit.
- VA appraisal and minimum property requirements. The home must be safe, sound and sanitary, which can complicate purchases of fixer-uppers.
- Residual income test. Unique to VA lending: the borrower must have a minimum amount left over each month after all obligations, varying by family size and region. It is a large part of why VA loans have historically low default rates.
Frequently Asked Questions
Is zero down actually a good idea?
It costs nothing extra in insurance, but it starts you with no equity, so an early move in a flat market can mean bringing cash to the closing table to cover selling costs.
Can I use a VA loan more than once?
Yes. Entitlement is restored after each loan is repaid, and in some cases two VA loans can be held at once with partial entitlement. The funding fee rises to 3.3% for subsequent use at low down payments.
Do VA loans have higher rates?
No — they typically price slightly below conventional rates, because the government guarantee lowers the lender's risk.