PART III · BUILDING A LIFE · CH 05
The VA home loan, without the sales pitch
VA doesn't lend you money. It guarantees part of a loan from a private lender, and that guarantee is what gets you better terms.
What the guaranty actually is
When people say "VA loan," they mean a mortgage from a regular bank, mortgage company or credit union that VA backs. Because VA guarantees part of it, the lender takes less risk and you get terms most buyers can't. VA isn't your lender, and it doesn't approve your credit. The lender does.
What you get on a VA-backed purchase loan:
- No down payment, as long as the sales price isn't higher than the home's appraised value.
- No private mortgage insurance (PMI) or mortgage insurance premiums.
- Fewer closing costs, which the seller may pay.
- Better terms and interest rates than many private lenders offer.
Source: VA: Purchase loan (checked 2026-10)
Entitlement, in plain terms
Entitlement is the amount VA will guarantee for you. It shows on your Certificate of Eligibility (COE). If your COE shows full entitlement, VA says you don't have a loan limit. That doesn't mean a bank will lend you any amount. The lender still has to approve you on income and credit, and the loan can't exceed the lower of the appraised value or the purchase price.
If you've already used some of your entitlement on a VA loan, you may have only part of it left. Then county loan limits matter, and you may need a down payment. The "Prior Loans charged to entitlement" table on your COE tells you where you stand.
Source: VA: Home loan limits (checked 2026-10)
Who qualifies, by when you served
You need enough service for your era, and a discharge that isn't other than honorable, bad conduct or dishonorable. Here are two of the eras VA lists:
| When you served | Minimum service (any one) |
|---|---|
| September 8, 1980 to August 1, 1990 (enlisted; officers from October 17, 1981) | 24 continuous months; or the full period (at least 181 days) you were called to active duty; or at least 181 days if discharged under a qualifying exception; or less than 181 days if discharged for a service-connected disability |
| August 2, 1990 to present | 24 continuous months; or the full period (at least 90 days) you were called or ordered to active duty; or at least 90 days if discharged under a qualifying exception; or less than 90 days if discharged for a service-connected disability |
Qualifying exceptions include hardship, convenience of the government, early out, a reduction in force, certain medical conditions and service-connected disability. National Guard and Reserve members can qualify with at least 90 days of non-training active duty, or 6 creditable years in the Selected Reserve. Other eras have their own rules, listed on VA's page.
If your discharge is the problem, you can apply for a discharge upgrade, or VA can do a Character of Discharge review.
Source: VA: Eligibility for a VA home loan (checked 2026-10)
Getting your COE
You need a COE before closing. Three ways to get one:
- Online at VA.gov. Sign in and request it.
- Through your lender. Many lenders can pull it in minutes through VA's Web LGY system. Ask.
- By mail. Fill out VA Form 26-1880 and mail it to your regional loan center. The address is on the last page of the form. This one takes longer.
If you're a veteran, have your DD214 ready. Active-duty members need a statement of service signed by their commander, adjutant or personnel officer. Guard and Reserve members have their own document list on VA's page.
Source: VA: How to request a COE (checked 2026-10)
The funding fee, and who doesn't pay it
Most borrowers pay a one-time VA funding fee, a percentage of the loan amount. These rates have been in effect since April 7, 2023:
| Loan type | First use | After first use |
|---|---|---|
| Purchase, less than 5% down | 2.15% | 3.3% |
| Purchase, 5% or more down | 1.5% | 1.5% |
| Purchase, 10% or more down | 1.25% | 1.25% |
| Cash-out refinance | 2.15% | 3.3% |
| IRRRL (streamline refinance) | 0.5% | 0.5% |
You don't pay the fee at all if any of these is true:
- You receive VA compensation for a service-connected disability.
- You're eligible for that compensation but get retirement or active-duty pay instead.
- You receive Dependency and Indemnity Compensation (DIC) as a surviving spouse.
- You're a service member with a proposed or memorandum rating, issued before closing, that finds you eligible for compensation.
- You're on active duty and show evidence of a Purple Heart on or before closing.
On a $400,000 first-use loan with nothing down, 2.15% is $8,600. If you have a pending disability claim, tell your lender. The timing matters.
Source: VA: Funding fee and closing costs (checked 2026-10)
Refinancing: IRRRL and cash-out
IRRRL (Interest Rate Reduction Refinance Loan). Often called a streamline refinance. You must already have a VA-backed loan and certify that you live, or used to live, in the home. It can lower your rate or move you from an adjustable rate to a fixed rate. VA's own advice is to divide the closing costs by your expected monthly savings to see how long it takes to break even.
Cash-out refinance. Replaces your current loan, VA or not, with a new VA-backed loan and lets you take cash out of your equity. You need a COE, you have to meet VA's and the lender's credit and income standards, and you have to live in the home.
Source: VA: IRRRL and VA: Cash-out refinance (checked 2026-10)
Source: CFPB and VA: Refinancing offers that sound too good to be true (Nov. 2017, checked 2026-10)
Questions people ask
Can I use it more than once?
Yes. The funding fee table has a separate "after first use" column for that reason, and your COE shows how much entitlement you have left.
Is it only for first-time buyers?
No. Nothing in VA's eligibility rules requires you to be a first-time buyer. The requirements are service, discharge, a COE and the lender's approval.
Can I buy a rental property with it?
VA's refinance programs require that you live, or used to live, in the home. Ask your lender about occupancy rules before you shop.
Source: VA: Eligibility for a VA home loan, VA: Accredited representative FAQs (checked 2026-10)