a soldier who is eligible for VA loans

Understanding VA Loans

The Department of Veterans Affairs (VA) has a lending program to help veterans purchase homes. These VA loans are a very simple and accessible way for veterans to achieve home ownership without most of the problems associated with traditional mortgages. If you are a veteran, it is important to understand the details of VA loans before pursuing this lending option.


The VA loan program was started in 1944. Loans under the program are actually issued and managed by normal financial institutions like banks or mortgage lenders. The VA backs these loans and sets different official terms for lenders. This makes banks and other companies more willing to provide mortgages to veterans while protecting borrowers. VA loans have nearly all the attributes of typical mortgages, such as interest rates, fees, and a defined repayment schedule.


To be eligible for the VA loan program, you must have served in the military in the past or be on active duty. You are required to present form number 26-1880 from the VA and documented proof of service to potential lenders. The main qualifications are serving at least 90 days during wartime or 181 days during peacetime. If you are currently active duty, then you qualify after 90 continuous days of service. Other qualifications include sufficient income to cover the loan payments and a good credit history. Certain spouses of veterans who died due to military service or related disabilities are eligible for VA loans as well.


The main purpose of a VA loan is to cover the cost of buying a house. Loans can cover up to 100% of the cost of a home that you will use as a primary residence. The loan money can sometimes be used to modify or improve a home; this largely means modifying the home to accommodate any disabilities. Some money from the loan can also be used to increase the energy-efficiency of a house. If you can meet a number of conditions, VA loans can be used to construct a new house as well.


The amount of a VA loan is usually based on the appraised value of the house or the value of the property. Although banks might approve a loan for a larger sum, the amount above the value of the house is largely the responsibility of the borrower and can come with additional fees. Larger loans could even require a down payment. Technically, however, there is no limit on how much can be borrowed.


One of the main benefits of these types of loans is that the VA does not require a down payment on qualified loans. It is important to understand that banks can require you to pay a down payment anyway, although this is largely required solely for large loans. Another benefit is that interest rates for VA loans are generally lower than or competitive with market rates. You also have the option to refinance the loan later to take advantage of lower rates or to get cash. A final benefit is that most lenders do not require you to hold private mortgage insurance for VA loans.