What Is a VA Loan?
A VA loan is a mortgage benefit for eligible veterans, active-duty service members, and surviving spouses, backed by the U.S. Department of Veterans Affairs. VA loans offer some of the best terms available in the mortgage market — no down payment required, no PMI, competitive interest rates, and no prepayment penalties.
VA Loan Benefits vs Other Loan Types
| Benefit | VA Loan | FHA | Conventional |
|---|---|---|---|
| Down payment | 0% | 3.5% | 3-20% |
| PMI/MIP required | None | Life of loan | Until 20% equity |
| Credit score minimum | ~620 (varies) | 580 | 620-640 |
| Funding/Insurance fee | 1.25-3.3% | 1.75% upfront | None |
| Interest rates | Typically lowest | Moderate | Varies |
The VA Funding Fee Explained
The VA funding fee is a one-time fee that helps fund the VA loan program. It is not insurance — it goes to the VA, not a private company. The fee varies based on your down payment and whether it is your first VA loan:
- First use, 0% down: 2.15% of the loan amount
- First use, 5-9% down: 1.5% of the loan amount
- First use, 10%+ down: 1.25% of the loan amount
- Subsequent use, 0% down: 3.3% of the loan amount
- Exempt (disability rating): 0% — fee is waived entirely
The funding fee is almost always rolled into the loan amount rather than paid at closing, which increases your loan balance slightly but keeps your out-of-pocket costs at closing minimal.
Who Is Eligible for a VA Loan?
- Veterans who served 90+ days of active duty during wartime or 181+ days during peacetime
- Active-duty service members after 90 days of continuous service
- National Guard and Reserve members with 6+ years of service
- Surviving spouses of veterans who died in service or from a service-connected disability
You will need a Certificate of Eligibility (COE) from the VA. Your lender can often obtain this directly or you can apply at va.gov.