What are the advantages of a VA home loan?

If you’re in the market for a home and have started researching mortgages, it’s easy to get overwhelmed by all the different loan types. There are conventional loans, which are loans offered by private lenders, and an array of government-backed loans, like VA, FHA, and USDA loans. These are loans guaranteed by the U.S. government to make homeownership more accessible.

One of the more popular government-backed loans is the VA loan, which is only available to eligible military service members, veterans, reservists, and certain surviving spouses. Compared to conventional loans, the advantages of a VA home loan are many, including the potential to save you thousands of dollars over the life of the loan.

VA loans are not the ideal choice for everyone, however, so we’ll break down who is eligible, detail what’s involved in securing a VA loan, and go over VA home loan pros and cons so you can decide if one is right for you.

What is a VA loan?

A VA loan is a mortgage that is offered by private lenders but guaranteed by the VA (the U.S. Department of Veterans Affairs). So, instead of lending money directly, VA-backed loans are partially guaranteed by the VA, which allows private lenders to offer loans to more homebuyers.

Because the VA guarantees the loan, there are fewer restrictions. For instance, VA loans have no down payment requirement, no private mortgage insurance (PMI), competitive interest rates, limited closing costs, and flexible credit requirements.

However, on the “down” side, they are restricted to former and active military or, in some cases, their spouses. They also require a funding fee.

Who qualifies for a VA loan?

VA loans were created to honor and reward military service and make it easier for those who serve to buy a home. You may qualify if you are:

• An active-duty service member. Generally, you must have served at least 90 continuous days of active duty.
• A veteran: You’ll need to meet minimum active-duty service criteria based on when you served. For example, those who served from August 2, 1990 to present typically need 24 continuous months, or 90 days under certain qualifying exceptions. Other exceptions apply as well.
• A reservist. Reservists qualify with at least 90 days of non-training active-duty service or six “creditable years” in the Selected Reserve (and are still serving or discharged honorably/retired).
• A National Guard member. At least 90 days of non-training active duty, or serve for six creditable years in the Guard.
• A surviving spouse of a service member who died in the line of duty or from a service-related disability. You may be eligible if you meet certain criteria.

It’s important to note that this is not an exhaustive list of details for qualification, so you should research your own unique situation. You can find tips about VA loans here.

To establish eligibility, you’ll first need a Certificate of Eligibility (COE). This verifies your military service to lenders.

At a glance: Pros and cons of a VA loan

VA loans have a lot of great benefits, but, as with anything, there are some drawbacks as well. We’ll discuss them further below, but here’s a quick glance at some VA home loan pros and cons.

What are the advantages of a VA loan?

Let’s take a deeper dive into the strengths of VA loans.

No down payment required

A down payment is the upfront cash you need to pay out-of-pocket when you buy a home. For conventional loans, this is 3% to 20% of the home’s sale price. FHA loans require a down payment of at least 3.5%.

VA loans, on the other hand, have no down payment requirement. So, while you are perfectly welcome to make a down payment, which lowers the amount you’ll need to borrow, you could buy a home with zero money down.

Mortgage insurance not required

Mortgage insurance protects the lender against losing money in case you default on your loan. So, while you pay for the mortgage insurance, it protects your lender, not you. There are several types of mortgage insurance. Conventional loans require private mortgage insurance (PMI), which is required if the borrower’s down payment is less than 20%. Mortgage insurance premium (MIP) is required for all FHA loans.

VA loans have no PMI or MIP requirement, even with a no money down loan. This could potentially save you hundreds of dollars a month.

Lower interest rates than most mortgage types

Think of your mortgage interest rate as the price you pay lenders to borrow their money. And because homes are a major purchase, even a small difference in the interest rate can make a big difference in the cost of your loan over 30 years. VA loan interest rates are typically lower than conventional and FHA loans.

Lower rates not only mean that you save money over time, they also mean your monthly payment could be smaller. This is why, when you compare loans, the interest rate and loan terms should be at the top of your list of things you check.

Generally lower closing costs

Closing costs are the fees and expenses you must pay at the end of your homebuying journey to “close” on your mortgage. These include things like title insurance, origination fees, taxes, and other costs. And they can sometimes be a shock if you’re not ready, amounting to between 2% and 5% of the property’s purchase price.

With a VA loan, the Department of Veterans Affairs limits what lenders can charge when it comes to closing costs. VA loan closing costs can range based on a number of factors.

Flexible refinancing options

Refinancing is a way you can get a new mortgage to replace your existing one. Homeowners often do this to lower their interest rate, reduce their monthly payments, or gain more favorable terms. A VA loan makes refinancing easier than other loans in many cases due to their Interest Rate Reduction Refinance Loan (IRRRL), also known as a “VA streamline refinance.”

The IRRRL reduces your interest rate, demands less paperwork, has no appraisal in many cases, and has reduced upfront costs compared to other refinancing options.

What are the disadvantages of a VA loan?

While VA loans enjoy many benefits, they do come with some cons. Here are some to be aware of.

The VA requires a funding fee

All VA loans require you to pay a funding fee. This fee helps reduce the cost of the loan for taxpayers and is part of your closing costs. Depending on whether you are a first-time borrower and the amount of your down payment, your funding fee will be between 1.25% and 3.3%.

The loan may only finance your primary residence

VA loans are meant to be used for primary residences, not vacation homes, second homes, or investment properties. To get your VA loan, you’ll need to certify that you will occupy your home within a reasonable timeframe after your loan closes. This is why it’s so important to know how you’ll use a property before applying for financing.

If you’re interested in a second home, vacation home, or investment property, you should explore other options for financing, of which there are many.

The VA appraisal and inspection processes are strict

Every VA loan requires a VA appraisal and inspection to confirm the home’s value and to check for minimum property requirements (MPRs) set by the VA. They are part of your closing costs and include things like naturally ventilated attics and basements, access from all-weather streets, working electrical, and a host of others. You, the buyer, pay for the appraisal fee and inspection fee and this can increase your upfront cost.

A limited number of lenders participate in the program

Not all lenders offer VA loans, so your choices might be limited. Rocket Mortgage does offer VA loans, but it’s still a great idea to shop around to make sure you get the lender that understands and accommodates your needs best.

There are limits to how much you can borrow

While VA loans don’t have official limits for the amount you can borrow, lenders who offer VA loans typically do. A limit is the maximum amount you can borrow. Conventional loan limits vary by state and county, but in 2025, they are $806,500, except in certain high-cost counties, Alaska, and Hawaii.

If you need to borrow more than that, you will need a jumbo loan, which comes with its own rates. This is why it’s crucial to understand whether you’ll need to apply for a regular VA loan or a jumbo VA loan for the area and home you want to buy.

Is a VA loan right for you?

If you are a current or former service member or a member of another group that qualifies for a VA loan, it can potentially save you a lot of money when you buy a home. VA loans are especially powerful for those who can’t make a down payment and those wanting to avoid the extra cost of mortgage insurance.

However, if your goal is to buy a vacation home or rental property, a VA loan is not the right choice. And even if that’s not your current plan, carefully evaluating your long-term goals, especially how long you plan to live in your home, is an important step when shopping for the ideal mortgage.

The bottom line: A VA loan can meet your needs

VA loans are one of the most borrower-friendly mortgages available. They offer no down payment requirements, no mortgage insurance demand, low rates and closing costs, and affordable refinancing options.

There are a few trade-offs, however, such as funding fees, stricter appraisal and inspection criteria, and a primary residence requirement. Still, for many borrowers, these are outweighed by the many benefits of a VA loan.

If you’re eligible for a VA loan and ready to apply for one, you can reach out to Rocket Mortgage® to see what you qualify for.

Rocket Mortgage is a VA-approved lender, not endorsed or sponsored by the Dept. of Veterans Affairs or any government agency.

The VA Streamline program may have stricter requirements in some states. In order to qualify for the VA Streamline program, you must have a VA loan. The VA Streamline is only available on primary residences. Cash-out transactions are not allowed. In order to qualify for a VA Streamline, a 0.5% minimum reduction in interest rate on the previous fixed-rate loan must occur if the new loan will be a fixed rate or a 2% minimum reduction in interest rate on previous adjustable rate mortgage loan must occur; a minimum of 6 months of consecutive mortgage payments must be paid on the current loan at the time of application. Some states may require an appraisal. Additional restrictions/conditions may apply.

Refinancing may increase finance charges over the life of the loan.

The 3% down payment option is only available on certain conventional loan products and is not available in all states. Additional terms and conditions may apply.

Rocket Mortgage is not acting on behalf of FHA or HUD.