What Is A VA-Guaranteed Loan?

Aug 15, 2024

5-minute read

Share:

A family in the process of moving, possibly packing belongings or transitioning to a new home.

The primary purpose of the Department of Veterans Affairs (VA) home loan program is to help members of the veteran/military community afford homes. VA-guaranteed loans allow private lenders to participate in the program, increasing the number of veteran families who can secure mortgages.

VA Home Loan Guarantee, Explained

The overwhelming majority of VA loans do not come directly from the VA. Instead, the VA guarantees mortgages originated by lenders that meet their guidelines. These loans are available to eligible active-duty service members, National Guard personnel, reservists, veterans and qualifying surviving spouses. Guaranteed home loans make up the vast majority of VA loans issued each year.

When the VA “guarantees” a loan, it means they will cover a percentage of the loan value if the borrower defaults on the mortgage. This reduces the loan’s risk, allowing lenders to underwrite loans with conditions they normally couldn’t, like not needing a down payment. In short, the VA guarantee is what allows participating lenders to offer special terms to qualifying service members.

Are There Direct Loans From The VA?

There is one direct loan program available. It’s specifically for Native Americans who have served, or for qualifying service members with a Native American spouse.

The Native American Direct Loan (NADL) offers a zero-down payment loan option directly from the VA with favorable terms around the interest rate and closing costs. Interest rates start at 2.5% (as of July 2023) for eligible Native American service members, veterans and their spouses who are purchasing on tribal trust land.

Because these loans come directly from the VA, no lender can help you with these, but we did want you to understand the difference between direct and guaranteed loans.

See What You Qualify For