What Is a VA Loan?

A Complete Guide to VA Loans

VA loans offer homeownership benefits to veterans, surviving spouses, and active members of the military. With no down payment or mortgage insurance, VA loans are a benefit of military service that helps Americans achieve their homeownership dreams. Discover how VA loans work, how to qualify, and much more with our comprehensive guide.

What Is a VA Loan?

The United States Department of Veterans Affairs (VA) created the VA loan to help American veterans afford to buy and own a home. Although VA loans are mortgages backed by the VA, they are offered to veterans by private lenders like Freedom Mortgage.

VA loans can be a great option to enjoy a lower interest rate and no down payment when you buy a home. Whether you're a military first-time homebuyer or a veteran homeowner looking to refinance, the VA loan benefit can help you achieve some big goals.

Types of VA loans

There are different types of VA loans, all intended to meet the needs of the military community:

• VA purchase loan: Helps eligible veterans, active-duty service members, and surviving spouses buy a home with no down payment
• Interest rate reduction refinance loan (IRRRL): Helps eligible VA borrowers refinance their existing VA loan to a lower interest rate, often with no appraisal and simplified processing
• VA cash out refinance loan: Helps eligible homeowners (with an existing conventional or VA loan) tap into their home's equity to access cash by refinancing to a new VA loan

How Does a VA Home Loan Work?

VA home loans are mortgages that are backed by the VA and offered through private lenders. These loans help eligible military members, veterans, and surviving spouses purchase or refinance their homes.

The VA guarantees part of the loan against a default, which allows lenders to usually offer slightly lower rates and more favorable terms than they can with conventional mortgages not backed by the federal government.

VA Loan Benefits and Considerations

VA loans are a benefit of military service and are typically the best choice for qualifying Americans who want a mortgage. However, VA loans have pros and cons to consider if you're thinking about applying for a loan. Key benefits often include:

• No down payment requirement
• No mortgage insurance requirement
• Competitive interest rates that are typically slightly lower than conventional loans
• Less restrictive minimum credit score requirements

VA loans require a VA funding fee, which is a percentage of the loan amount and is usually rolled into the VA loan. The VA funding fee is waived for disabled veterans and a few other exemptions. If you aren't sure if you can waive the VA funding fee, just ask.

Other restrictions on VA Loans are that they are limited to primary home purchases and have property eligibility requirements. Again, if you aren't sure if your home qualifies for the VA loan, we'll help you figure it out.

VA Loan vs. Conventional Loan

While VA loans have some similarities with conventional loans, there are also key differences:

VA Loan Eligibility Requirements

To qualify for a VA loan, you must meet certain requirements:

• Veteran or military status: To qualify, veterans and active-duty/reserve and National Guard service members need to meet minimum service requirements. There are requirements for surviving spouses too. Most VA borrowers will need a Certificate of Eligibility (COE) to verify their eligibility.
• Down payment: VA loans allow homebuyers to purchase a house without making a down payment. However, making one can reduce the VA funding fee, lower monthly payments, and help you build immediate equity.
• Credit score: VA loans generally have flexible credit score requirements. At Freedom Mortgage, clients may qualify with a FICO score as low as 550 to buy a home or save money from streamlined and other refinance options.
• Income: There are no official income limits for VA loans, but lenders often require a debt-to-income ratio (DTI) of 41% or less. Exceeding this ratio may impact your approval or lead to less favorable terms, unless you qualify for a DTI exemption.
• Loan amount: The VA doesn't limit loan amounts, but lenders may do so based on your credit, income, and overall finances.
• Occupancy: VA loans are intended for primary residences only—you must live in the home you purchase. Second homes, rental properties, and investment properties aren't eligible (with a few exceptions - such as a 4-unit property). Another exception is with VA IRRRL refinances, where prior occupancy is sufficient.
• Property and appraisal: You can use a VA loan to buy single-family homes, VA-approved condos or townhomes, or—in some cases—manufactured homes. A VA-certified appraiser must assess the property to ensure it meets the VA's minimum occupancy requirements. You will also be required to get a VA pest inspection and if you're not on a local water system, a well water safety test.

If you have questions about your VA loan eligibility, Freedom Mortgage can help you explore VA loans and other loans that meet your needs.

How To Get a VA Loan: Get Started Today

VA loans make the journey to homeownership more affordable and achievable for the military community.

Learn more about how to apply, and see if you prequalify. Prequalification will give you an idea of what a VA loan could look like for you.

*Freedom Mortgage is a top VA lender in the United States according to Inside Mortgage Finance, Jan.-Mar., 2025.

Last reviewed and updated June 2025 by Freedom Mortgage.