VA home loans are a great option for eligible veterans, active-duty military personnel, and surviving spouses. VA mortgage rates are often lower than other types of loans.
The VA guarantees a portion of the loan, which allows lenders to offer more favorable terms. This can result in lower interest rates and lower monthly payments.
To qualify for a VA loan, you'll need to meet certain eligibility requirements. These include having served at least 90 days of active duty during wartime or 181 days during peacetime.
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Mortgage Types
You can choose from several types of VA home loans, including purchase and refinance mortgages, rehab and renovation loans, and the Native American Direct Loan. The VA loan program offers flexibility to fit your needs.
Here are some of the most common types of VA loans:
Keep in mind that while VA loans offer flexibility, conventional loans also have their advantages, especially for those who can make a down payment.
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Conventional
Conventional loans are a popular option for homebuyers. They can be used for primary or second homes, as well as investment properties.
A minimum down payment of 3% is usually required, although some lenders offer special zero-down loans. This can be a significant advantage for those with limited savings.
Private mortgage insurance is typically required if the down payment is less than 20%. This adds to the overall cost of the loan.
A 620 FICO score is a common lender requirement for conventional loans. This is a relatively low credit score, but it's not uncommon for homebuyers.
Ideally, the debt-to-income ratio should be under 36%. However, higher ratios can be accepted by some lenders.
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Property Type
The type of property you're buying can be a key factor in the VA-versus-conventional decision.
A VA loan can be used to purchase a primary residence, a second home, or a vacation home, but it can't be used to purchase an investment property.
The type of property you're buying can also impact the down payment requirements. For example, a VA loan typically requires no down payment for a primary residence, but a conventional loan may require a down payment of 5% or more.
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What Is a Mortgage Types
A 5-year ARM is an adjustable-rate mortgage with an interest rate that stays the same for the first five years.
The interest rate can change periodically with the broader market after the five years are up, and the rate adjustments are based on a benchmark index, such as the secured overnight financing rate (SOFR).
A 5-year ARM typically begins with a lower introductory rate than a fixed-rate loan has. This can be a great option for people who plan to move or refinance within the five-year period.
Different lenders may refer to the 5-year ARM by different names, such as the 5/6 ARM, 5y/6m, or 5yr/6mo ARM.
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Types of
There are several types of VA home loans that can help you achieve your homeownership goals. One of them is the VA purchase mortgage, which allows eligible veterans to buy a home with little to no down payment.
The VA cash-out refinance is another option, which lets you tap into your home's equity to cover expenses or consolidate debt. This type of loan can be a lifesaver for those in need of a financial boost.
The VA Energy Efficient Mortgage (EEM) is designed to help homeowners make energy-efficient improvements to their homes. This can lead to significant cost savings on utility bills and a more sustainable living space.
The VA streamline refinance, also known as a VA Interest Rate Reduction Refinance Loan (IRRRL), is a great option for those who want to lower their interest rate without a lot of hassle. This type of loan can save you money on your monthly mortgage payments.
If you're planning to renovate or repair your home, the VA rehab and renovation loan is a great choice. This loan allows you to finance the cost of repairs and renovations, making it easier to get your home in top shape.
The Native American Direct Loan (NADL) is a specialized loan program for Native American veterans. This loan offers favorable terms, including no down payment and lower interest rates, making it easier for Native American veterans to achieve homeownership.
Here are the types of VA home loans mentioned above:
Eligibility
To be eligible for a VA mortgage, you'll need to meet certain requirements. Active-duty service members who served 90 continuous days are eligible, as are veterans who have met length-of-service requirements.
You'll also qualify if you're a surviving spouse of a service member who died while in service, died from a service-connected disability, went missing in action, or was a prisoner of war. However, if you've remarried, you'll only be eligible if you remarried after age 57 or after December 16, 2003.
To break it down, here are the eligibility requirements:
- Active-duty service members who served 90 continuous days
- Veterans who have met length-of-service requirements (generally 90 days in wartime and 181 days in peacetime)
- Surviving spouses of veterans who died while in service, died from a service-connected disability, went missing in action, or were a prisoner of war
Minimum Down Payment
VA loans usually have the lowest down payment requirement. They usually require no down payment, but a lender may require money down if the purchase price of a property is higher than its current market value.
Conventional loans, on the other hand, usually require a down payment, which can be as low as 3%. Some lenders offer niche no-down-payment loans.
The funding fee for VA loans is a one-time, upfront charge ranging from 1.25% to 3.3% of the loan amount for purchase mortgages. This fee percentage depends on your down payment amount and whether you've ever had a VA loan.
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Eligibility Requirements
To be eligible for a VA loan, you need to meet certain requirements. You're likely eligible if you're an active-duty military member or veteran who meets length-of-service requirements.
You can also qualify if you served in the National Guard or Reserve for at least six years, or served 90 days (with at least 30 of them being consecutive) in active duty under Title 32 orders.
Surviving spouses of service members who died while on active duty or from a service-connected disability are also eligible, as long as they haven't remarried. However, if they remarried after the age of 57 and after Dec. 16, 2003, they can still retain eligibility.
The VA doesn't set a minimum credit score for VA loans, but lenders can set their own standards, which typically range from 580 to 620. The average FICO score of borrowers with VA purchase loans is around 725.
To qualify for a VA loan, you'll also need to meet the lender's requirements for credit and income. This means you'll need to have a stable income and a reasonable debt-to-income ratio.
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Here are the basic eligibility requirements for a VA loan:
- Active-duty service members who served 90 continuous days.
- Veterans who have met length-of-service requirements (generally 90 days in wartime and 181 days in peacetime).
- Service members or veterans who have completed 90 days of active-duty service or six creditable years in the Selected Reserve or National Guard.
- Surviving spouses of veterans who died while in service, died from a service-connected disability, went missing in action or were a prisoner of war.
Maximum Debt-to-Income Ratio
The maximum debt-to-income ratio is a crucial factor in determining mortgage eligibility. Lenders like to see a debt-to-income ratio of under 36% for conventional loans, but many will accept higher ratios.
The VA has no maximum debt-to-income ratio, but lenders are required to scrutinize loan applications more closely when the DTI is greater than 41%. This scrutiny can make it more difficult to qualify for a VA loan with a high DTI.
The average debt-to-income ratio for borrowers with conventional purchase loans that closed in the last 30 days was 37%, according to ICE Mortgage Technology. This is slightly lower than the average DTI for VA purchase loans, which was 44% during the same time period.
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What Is the Limit?
The VA loan limit is the maximum amount you can borrow without making a down payment.
In 2025, the standard VA loan limit is $806,500 for a single-family home in a typical U.S. county.
Loan limits still apply to borrowers who already have a VA loan or have defaulted on a VA loan, but not to current members of the military and veterans who have access to their full VA loan entitlement.
You can borrow up to $1,209,750 in high-cost areas, but you'll need to make a down payment if the home price exceeds the county limit.
Interest Rates
Interest rates play a crucial role in determining the cost of a VA mortgage. The average APR on a 30-year fixed-rate mortgage can fluctuate daily, influenced by various economic factors and the actions of the Federal Reserve.
As of January 4, 2025, the average APR on a 30-year fixed-rate mortgage rose to 6.984%, according to rates provided to NerdWallet by Zillow. This is 43 basis points higher than one year ago.
A basis point is one one-hundredth of one percent, and rates are expressed as annual percentage rate, or APR. Understanding how interest rates work is essential to making informed decisions about your VA mortgage.
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Your credit score plays a significant role in determining the mortgage rate you're offered. A higher credit score is generally seen as safer by lenders, which can result in a lower interest rate. While the VA doesn't set a specific minimum credit score, lenders typically want to see a score of at least 620.
The loan term and down payment also influence the mortgage rate you're offered. Shorter mortgage terms, such as a 15-year loan, come with lower rates but higher monthly payments. A down payment can lower your loan-to-value ratio, which can result in a lower rate.
Here's a breakdown of current VA mortgage rates:
The U.S. economy, global economy, and Federal Reserve also influence mortgage rates. Changes in inflation and unemployment rates, as well as global political worries, can move mortgage rates lower or higher. Understanding these factors can help you make informed decisions about your VA mortgage.
Application and Comparison
To apply for a VA home loan, you'll need to obtain a certificate of eligibility, which shows that your military service meets the requirements for a VA loan. You can request this document from the VA online or by mail, or have a VA-approved lender obtain it for you.
To find the right lender, shop around and get preapproved with multiple VA mortgage lenders to compare their qualification requirements and mortgage rates. Preapproval is nonbinding, but it'll give you an idea of what kind of mortgage you qualify for and how much you may be eligible to borrow.
You can also compare mortgage rates by providing some information about yourself and the home you want to buy on a lender's website or a mortgage comparison tool. This will give you more personalized rate quotes that reflect your individual situation.
To make an informed choice, compare mortgage rates and fees for both VA and conventional loans, considering your financial details. You can also visit with a loan officer who handles both types of loans to crunch the numbers and discuss options.
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Here's a comparison of loan requirements for VA and conventional loans:
The Final Decision
You've made it to the final stretch of the home buying process. A VA loan may be your best bet if you don't have a big down payment or have a higher DTI.
You'll pay the one-time VA funding fee, but you won't have to worry about annual private mortgage insurance costs. A conventional loan, on the other hand, may cost less if you can put down 20% and skip mortgage insurance altogether.
To make an informed choice, it's essential to compare mortgage rates and fees for both types of loans, taking into account your financial situation. This is where a loan officer who handles both VA and conventional loans can be a huge help, allowing you to crunch the numbers and discuss your options.
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Compare
To compare mortgage rates and fees for VA and conventional loans, you'll need to crunch the numbers based on your financial details. Visit with a loan officer who handles both types of loans to discuss options.
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A VA loan may be your best bet if you don't have a big down payment or have a higher debt-to-income (DTI) ratio. You'll pay the one-time VA funding fee, but won't bear the annual cost of private mortgage insurance.
Here's a comparison of loan requirements for VA and conventional loans:
To compare rates, you'll need to provide some information about yourself and the home you want to buy. Lenders use sample rates, which are based on assumptions about a "sample" borrower. To get more personalized rates, you'll need to provide your credit score, down payment amount, and other details.
It's a good idea to apply for mortgage preapproval from at least three lenders. With a preapproval, the lenders will verify some of the details of your finances, so both the rates offered and the amount you're able to borrow will be real numbers. Each lender will provide you with a Loan Estimate, which makes it easy to compare interest rates as well as lender fees.
When comparing rates, you'll usually see two numbers - the interest rate and the APR (annual percentage rate). The APR is usually the higher of the two because it takes into account both the interest rate and other costs associated with the loan.
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Frequently Asked Questions
Will mortgage rates ever be 3% again?
Mortgage rates returning to 3% are unlikely in the near future, with some experts predicting it may take decades. However, interest rates can fluctuate, and future trends are uncertain, making it worth staying informed.
Who is the #1 VA lender?
Navy Federal Credit Union is the #1 VA lender, offering 100% funding on VA and conventional mortgages with no down payment requirement or private mortgage insurance.
Sources
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