What is a VA Loan?

A VA loan is a mortgage guaranteed by the U.S. Department of Veterans Affairs for eligible veterans, active-duty service members, Reserve and Guard members, and some surviving spouses. The VA does not lend the money. A lender such as Lendia makes the loan, and the VA’s guaranty to that lender is what makes features like no monthly mortgage insurance possible.

What is a VA loan, in plain English?

The VA home loan program began with the Servicemen’s Readjustment Act of 1944, often called the GI Bill, and has been updated many times since. The idea is simple: people who served should be able to buy a home on fair terms. To make that work, the VA promises the lender that it will cover part of the loss if the borrower defaults. Because the lender carries less risk, it can offer terms that are hard to find elsewhere.

That promise is called the guaranty, and the amount of guaranty you can use is called your entitlement. Understanding those two words is most of the battle. Our guides on VA entitlement codes and the VA loan entitlement page go deeper.

How does the VA guaranty work?

Basic entitlement is $36,000. With full entitlement, the VA guaranty is 25% of the loan amount above $144,000, which is why there is no VA loan limit for a borrower who has never used the benefit or who has had entitlement restored. If you have used some entitlement and still have a VA loan outstanding, you have reduced entitlement, and county loan limits come into play. We explain how in What are the VA loan limits?

What makes a VA loan different?

• Low or no required down payment. Eligible borrowers can generally finance up to the home’s reasonable value without a down payment. That is a feature of the program, not a guarantee of approval, and there are limits we cover below.
• No monthly mortgage insurance. Conventional loans with less than 20% down require private mortgage insurance, and FHA loans carry mortgage insurance premiums. VA loans do not.
• A one-time funding fee instead. This fee helps offset the cost of the program. It can be financed, and many borrowers are exempt.
• No prepayment penalty. You can pay extra or pay off the loan early.
• Flexible credit guidelines. The VA sets no minimum credit score. Lenders set their own.
• Assumable. A qualified buyer can take over a VA loan with approval. See VA loan assumption.
• Streamlined refinancing. The IRRRL can lower your rate with limited paperwork. See VA loan refinancing.

What does a VA loan cost?

The main cost unique to VA loans is the funding fee. These are the rates for a home purchase:

Veterans receiving VA disability compensation, surviving spouses receiving DIC, Purple Heart recipients on active duty and certain others are exempt. Details are in our VA funding fee guide. Beyond the fee, expect normal California closing costs: lender or broker fees, appraisal, title, escrow, recording and prepaid items. Together these often run roughly 2% to 4% of the purchase price. The seller may pay normal closing costs and points, and other seller concessions are capped at 4%.

Who qualifies for a VA loan?

In general, you qualify through service: 90 consecutive days of active duty in wartime, 181 days in peacetime, or 6 years in the National Guard or Reserve. Surviving spouses may qualify too. Your Certificate of Eligibility (COE) shows the lender your entitlement. See VA loan eligibility for the full list, and Do I need a DD214? if you are missing paperwork.

Meeting the service test earns the benefit. It does not approve the loan. The lender still reviews credit, income, debts and residual income. For many purchases, At Lendia we can work with credit scores as low as 580 on loans up to $1,000,000, while larger loans typically need higher scores. Rates and terms depend on your situation.

What are the property and occupancy rules?

You must intend to live in the home as your primary residence, generally within a reasonable time after closing, often 60 days. One- to four-unit properties are allowed if you occupy one unit. The home must meet VA minimum property requirements for safety, soundness and sanitation. See types of properties eligible for a VA loan.

What does a VA loan mean in California?

California is one of the largest VA loan markets in the country, with eligible buyers from San Diego to Sacramento. Prices are high, so the lack of a VA loan limit with full entitlement and the absence of monthly mortgage insurance can make a real difference to the monthly payment. Expect a termite inspection on purchases, and remember that condo projects and older homes may need extra review. For program details, see our What Is a VA Loan? page and the VA Loans chapter.

At Lendia, we explain the VA process and shop your options

At Lendia, we compare VA loan options from multiple lenders, help you request your Certificate of Eligibility, and show you your payment and closing costs up front. A Licensed Lendia California Loan Officer will walk you through each step. Rates and terms depend on your situation; approval requires qualification. Contact us or get a rate quote now.

Frequently Asked Questions

Who can get a VA loan?

Eligible veterans, active-duty service members, Reserve and Guard members, and some surviving spouses. The service length required depends on when and how you served.

Is there a VA loan limit?

Not with full entitlement. County limits matter only if you have reduced entitlement.

Does the VA lend the money?

No. A private lender makes the loan, and the VA guarantees part of it.

Can I use a VA loan for a second home or investment property?

No. The home must be your primary residence. You can buy a one- to four-unit property if you live in one of the units.

Do I have to pay the funding fee?

Most borrowers do, but it can be financed, and some borrowers, including veterans receiving VA disability compensation, are exempt.

Does a VA loan mean I never need cash?

Not always. Cash can still be needed for closing costs, prepaids, a price above appraised value, or the portion above the county limit if you have reduced entitlement.