VA Loan Complete Guide (May 2026)
VA loans are the most generous mortgage product in America: 0% down, no monthly mortgage insurance, competitive rates, no loan limit for full-entitlement borrowers. Eligible military and veterans can save $20,000-$60,000+ over the life of the loan vs FHA or conventional. Verified May 2026.
Quick Answer: VA loan benefits at a glance
- 0% down payment — most generous in mortgage banking.
- No monthly mortgage insurance — saves $150-$250/month vs FHA/conventional with low down payment.
- Competitive interest rates — typically at or below conventional 30-year fixed.
- No loan limit for full-entitlement borrowers — buy any priced home you can qualify for.
- Funding fee waived for service-connected disability — saves $5K-$15K on typical loan.
- VA IRRRL streamline refi — no appraisal, minimal docs when rates drop.
- Assumable mortgages — your VA loan can be assumed by future buyer at your locked rate.
- Up to 4-unit property eligible as primary residence (house-hacking strategy).
Service-connected disability = funding fee WAIVED
The single biggest VA loan cost is the funding fee (1.25-3.30% of loan amount). If you have ANY VA service-connected disability rating that triggers disability compensation, you are EXEMPT from the funding fee. On a $400K loan, that's $5,000-$13,200 in savings. Surviving spouses receiving DIC and Purple Heart recipients also qualify for the waiver. Verify your exemption status in your VA disability decision letter or by contacting the VA directly. Many borrowers don't realize they qualify.
VA vs Conventional vs FHA
| Feature | VA Loan | Conventional | FHA |
|---|---|---|---|
| Down payment requirement | 0%Best | 3% (HomeReady) / 5% standard | 3.5% (with 580+ FICO) |
| Monthly mortgage insurance (PMI/MIP) | $0 — none, everBest | PMI required if <20% down (cancels at 78% LTV) | MIP 0.55% — lasts life of loan if <10% down |
| Upfront fee | VA funding fee 1.25-3.3% (waived for service-connected disability) | NoneBest | UFMIP 1.75% |
| Loan limits | No limit (full entitlement)Best | $766,550 / $1,149,825 high-cost | $541,287 / $1,249,125 high-cost |
| Minimum credit score | No federal min (lenders typically 620, some 580) | 620 typical | 580 (3.5% down)Best |
| DTI flexibility | 41% guideline + residual income test (often more flexible)Best | 43-50% typical | Up to 50% with compensating factors |
| Sellers can pay closing costs | Up to 4% of loan amount + reasonable closing costs | Up to 3% (most LTVs) | Up to 6% |
| Prepayment penalty | None | None | None |
| Refinance options | VA IRRRL (streamline) + VA cash-out refi | Standard rate-and-term + cash-out | FHA Streamline + FHA cash-out |
| Property type | Primary residence ONLY (with limited exceptions) | Primary, second home, investment | Primary residence ONLY |
| Best fit | Eligible military/veteran — almost always wins on cost | FICO 700+ with 5%+ down + non-military | FICO 580-680 + low down + non-military |
VA Funding Fee Schedule (May 2026)
The funding fee is the VA's primary cost on the loan, paid once at closing (or financed into the loan). Active duty, veterans, and National Guard/Reserve all pay slightly different rates.
| Loan Type | Down Payment | First-Time Use | Subsequent Use |
|---|---|---|---|
| Purchase or construction | 0% – 4.99% | 2.15% | 3.30% |
| Purchase or construction | 5% – 9.99% | 1.50% | 1.50% |
| Purchase or construction | 10%+ | 1.25% | 1.25% |
| Cash-out refinance | N/A | 2.15% | 3.30% |
| VA IRRRL (streamline refi) | N/A | 0.50% | 0.50% |
| Service-connected disability / surviving spouse / Purple Heart | Any | EXEMPT | EXEMPT |
Which VA loan product fits your situation?
Match the VA product to your purchase, refi, or eligibility scenario:
- Active duty military or veteran buying primary residence — first VA loan→ Standard VA purchase loanStandard VA purchase is the foundational benefit. 0% down, no monthly MI, competitive rates, no loan limit. Funding fee for first-time use is 2.15% for active duty/veterans (1.25% if you put 5%+ down). Funding fee can be financed into the loan. Required Certificate of Eligibility (COE) — request through eBenefits or your lender can pull it. For 95%+ of eligible buyers, this is the right choice.
- Eligible military with 10%+ disability rating from the VA→ Standard VA loan with funding fee waiverBorrowers with VA service-connected disability ratings (any percentage that triggers VA disability compensation) are EXEMPT from the VA funding fee — the largest cost in a VA loan. On a $400K loan, that's $8,600-$13,200 in savings. Surviving spouses receiving DIC (Dependency and Indemnity Compensation) and Purple Heart recipients also qualify for funding fee waivers. Confirm exemption status in your VA disability decision letter.
- Veteran with existing VA loan, market rates dropped→ VA IRRRL (Interest Rate Reduction Refinance Loan)VA IRRRL is one of the cleanest refi products in mortgage banking: no appraisal, no income verification, no termite inspection, reduced VA funding fee (only 0.5%), and you can roll closing costs into the new loan with no out-of-pocket cost. Many lenders offer no-cost IRRRLs (the "no cost" means the lender absorbs closing costs in exchange for a slightly higher rate). Best for VA borrowers whose existing rate is 0.5+ percentage points above current market.
- Veteran needing $50K+ cash from home equity→ VA cash-out refinance (allows up to 100% LTV, unlike conventional 80%)VA cash-out refi uniquely allows up to 100% LTV — meaning you can pull every dollar of equity. Conventional cash-out caps at 80% LTV. The funding fee on VA cash-out is 2.15% first use / 3.3% subsequent use (waived for service-connected disability). For veterans needing maximum equity access, VA cash-out beats conventional cash-out on accessible amount, though the 100% LTV product carries higher rates than 80% LTV refi.
- Buying a multi-unit property (2-4 units) as primary residence→ VA loan (one of the few 0% down options for multi-unit)VA allows you to buy up to a 4-unit property with 0% down as long as you live in one of the units as your primary residence. This is a unique benefit — conventional and FHA require larger down payments for multi-unit properties. The other units can be rented out, with rental income often qualifying you for a larger loan. House-hacking strategy: live in one unit, rent the others, build wealth via tenant-paid mortgage. VA loan limits don't cap multi-unit purchases for full-entitlement borrowers.
- Already have a VA loan but want to keep the house and use VA again on a new home→ VA loan with second-tier (residual) entitlementIf you already have a VA loan and are still occupying that property, you can sometimes use remaining VA entitlement on a second VA loan — useful for PCS moves where you keep the first house as a rental. This is called "second-tier entitlement" or "bonus entitlement." The math is complex (depends on county loan limits and how much entitlement you used originally). Most VA-experienced lenders (Veterans United, Navy Federal, USAA) can calculate your remaining entitlement and structure the second loan.
- Veteran whose property doesn't meet VA Minimum Property Requirements (MPRs)→ Negotiate seller repairs OR pursue VA renovation loan (rare) OR conventionalVA appraisals require properties to meet Minimum Property Requirements — safe, sanitary, structurally sound. If the appraisal flags issues (peeling lead paint, missing handrails, broken HVAC), the seller must complete repairs OR you renegotiate the price OR you walk away. VA renovation loans exist (similar to FHA 203(k)) but are rare and lender support is limited. If you're buying a fixer-upper, conventional financing may be more practical despite losing VA benefits.
- Spouse is a veteran but you're not — joint application→ VA loan with veteran as primary borrowerJoint VA loans with one veteran spouse and one non-veteran spouse are allowed. The veteran is the primary borrower and the loan is fully VA-backed. The funding fee applies normally. This typically yields better terms than the non-veteran spouse applying for FHA or conventional alone. Note: if one or both spouses are veterans, two VA loans on different properties may be possible using separate entitlement allocations.
Worked example: $400K home purchase, eligible veteran
Comparing VA loan vs FHA vs conventional on a $400K primary residence purchase. 720 FICO. 30-year fixed.
| Loan Type | Down Payment | Upfront Fee | Monthly P&I | Monthly MI | 10-Year Total |
|---|---|---|---|---|---|
| VA loan (no disability waiver) | $0 | $8,600 funding fee (financed) | $2,683 | $0 | $321,960 |
| VA loan (disability waiver) | $0 | $0 | $2,627 | $0 | $315,240 |
| FHA (3.5% down) | $14,000 | $6,755 UFMIP (financed) | $2,575 | $179 | $330,480 |
| Conventional 20% down | $80,000 | $0 | $2,098 | $0 | $251,760 |
The take:Conventional 20% down has the cheapest 10-year total cost — but requires $80K cash up front. Among low-down-payment options, VA wins by $8,500-$15,200 vs FHA over 10 years. With disability waiver, VA wins by another $6,720. The biggest hidden cost is FHA's ongoing MIP that lasts the life of the loan — over 30 years, that adds $50K+ vs VA's zero ongoing MI. For eligible veterans, VA almost always wins unless you're putting 20%+ down on conventional.
Check your credit before applying for a VA loan
VA lenders typically require 580-620 FICO minimum. Higher FICO gets you better rates — a 740+ borrower can be 0.25-0.50 percentage points lower than 680 FICO. Credit Sesame gives you a free credit score and monitoring — soft pull, no impact, $0 to start. Confirm your tier before pre-qualifying with VA-approved lenders.
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Frequently Asked Questions
How we built this
VA loan details verified May 2026 against va.gov VA Home Loan benefit pages, VA Form 26-1880 instructions, and VA Lenders Handbook. Funding fee schedule confirmed against the VA's 2026 fee table. VA IRRRL eligibility verified against current VA streamline refinance rules. Lender comparison data from Veterans United, Navy Federal Credit Union, USAA, and major VA-approved lenders. Eligibility rules verified against eBenefits.va.gov and the VA's minimum service requirements.