what is a va loan

If you're a veteran or a military service member, you're likely qualified for a VA loan.

Are you a veteran hoping to buy a home? You could be eligible for big savings and great financing terms.

If you are one of millions of veterans or military service members hoping to buy a home, a VA loan can help make your dream of home ownership possible. The VA is the U.S. Department of Veterans Affairs, a department within the federal government that provides healthcare and other benefits to veterans and military families. The VA home loan program helps military families like yours obtain a mortgage or home improvement loan with the best possible terms.

What is a VA loan?

A VA loan is a loan guaranteed by the U.S. Department of Veterans Affairs. The loan can be used for the purchase of a home, which must be your personal residence. A VA loan can also be used to build a new home, purchase a manufactured home and/or lot, or make energy-efficient improvements to a current residence. Although a VA loan cannot be used to purchase a business or obtain a commercial property, it can be used to buy a farm that includes a residence. Roughly 2.6 million borrowers had an active, VA-guaranteed home loan in 2016, according to VA statistics.

How the VA home loan program works.

The VA doesn’t actually lend you money to buy a home. Instead, it guarantees part of the loan—which you obtain through a bank or other lender. Since the VA is partially backing the loan, the lender has more confidence that the loan will be repaid, and views the loan as less of a risk. As a result, the lender can offer you better terms for VA loans.

VA loan have attractive terms.

In many cases, you don’t need a down payment with a VA loan. Lenders establish their own rules as to what, if any, down payment they require. VA loans also typically have lower interest rates than a conventional mortgage. The VA charges a one-time funding fee, but this can be rolled into the loan. The VA waives this funding fee for veterans who receive a VA disability payment.

You must meet reasonable eligibility criteria.

There are eligibility requirements for VA loan approval, but they are more flexible and relaxed than you would often encounter for other types of loans. You must meet certain criteria related to length of service and discharge conditions (if applicable). The specific criteria vary depending on when you served and in what capacity. In some cases, spouses of a deceased veteran or other eligible beneficiaries may also be able to apply.

There is no specific minimum credit score required, and no maximum debt ratio, so this may be a good option if you are trying to rebuild your credit or have recently done so. Lenders usually look at your whole application package overall when making their decision. If your debt ratio is unusually high, the lender may require additional documentation or an explanation of the circumstances, as well as details about how you intend to repay the loan. Lenders will also want to see that you have enough steady income to manage the loan payments in addition to your existing debt and living expenses.

It’s an option if you want to refinance.

You can also obtain a VA loan to refinance an existing loan (whether that loan was guaranteed by the VA or not) to get a better interest rate. If you want to refinance your home, the same criteria apply: the property must be your personal residence which you currently occupy.

VA loans are a benefit you can use more than once.

The home loan benefit is reusable. If you have already gotten a VA loan, you can have your eligibility restored if you have paid off the previous loan in full, or if you find another eligible borrower to assume that existing loan.

Find out how to apply for a VA loan.

If you are interested in applying for a VA loan, you can check your eligibility through eBenefits. That’s where you can also print out the Certificate of Eligibility that lenders require. You should then contact the lender of your choice to find out if they handle VA loans. The VA recommends talking with several mortgage lenders so you can compare rates and other terms to find the deal that would be best for you.

Are you shopping for a mortgage? Find a local lender on Trulia who can help you get pre-qualified.