A “VA loan” is a mortgage guaranteed by the Veterans Administration. It was created in 1944 and signed into law by President Franklin D. Roosevelt.
VA loans provide veterans and/or their surviving spouses with a federally guaranteed mortgage with zero down payment, otherwise known as 100% financing.
It’s one of the few places a prospective homeowner can still buy a house with zero down, now that the FHA requires 3.5% down and most mortgage lenders require 10% or more.
The loan program, also referred to as the GI Bill, has been highly successful and has helped millions of American veterans and their families acquire a home.
VA Loan Eligibility Requirements
VA loans do have varying eligibility requirements depending on the duration and type of military service performed. Veterans who served on active duty for 90 days during wartime, or 181 or more continuous days during peacetime are eligible.
There is also a two-year requirement if the veteran enlisted and began service after September 7, 1980 or if the veteran was an officer and began service after October 16, 1981. Additionally, there is a six year requirement for National Guards and reservists along with other specific criteria.
Keep in mind that a VA loan must be used for personal occupancy only (no investment properties), and can be issued by qualified banks and lenders as VA guaranteed loans.
Potential homebuyers can borrow up to 100% for a purchase without paying private mortgage insurance and current homeowners can borrow up to 90% loan-to-value for a refinance.
A VA funding fee of 0% to 3.3% of the loan amount must be paid to the VA, and can be financed on top of the total loan amount.
