What Is a VA Loan & How Do You Qualify?

Most home buyers must borrow money before they can buy a piece of property. Without a mortgage, it’s unlikely many have enough funds to make such a large purchase, and each such loan has its own set of requirements and stipulations. If you're a veteran or currently serving in a branch of the U.S. Armed Forces, you may qualify for a VA loan.

VA loans are available to borrowers who've served or are serving in the U.S. military. The duration of service is an important factor in the qualification process.

VA loans, administered by the U.S. Department of Veterans Affairs, have a lot in common with typical mortgages. Borrowers can obtain financial assistance to purchase a home, and are required to make monthly payments until they repay the debt. However, this type of mortgage loan comes with additional benefits many others don’t offer.

What Benefits Do VA Loans Offer?

A VA loan offers several significant benefits to those who qualify. Most do not have to make a down payment on their home, for example. Typically, borrowers are expected to put anywhere from 3 to 20 percent down, depending on their finances and the type of loan they’re using to make the purchase. With a VA loan, qualified home buyers won’t have to worry about paying a minimum percentage down.

A VA loan also helps qualified borrowers avoid the private mortgage insurance (PMI) typically associated with conventional mortgage loans. 

“Like other kinds of mortgage insurance, PMI protects the lender—not you—if you stop making payments on your loan,” states the federal Consumer Financial Protection Bureau. “PMI is usually required when you have a conventional loan and make a down payment of less than 20 percent of the home’s purchase price.”

Since VA loans are guaranteed by the Veterans Affairs Department, the lender is already protected if a borrower defaults on the loan.

Other advantages of VA loans include:

• Flexible guidelines regarding income, debt-to-income ratio and credit score
• Financial assistance for anyone having trouble making the monthly payments
• Lower interest fees
• No private mortgage insurance requirements

Who Qualifies for VA Loans?

VA loan applicants must meet one of the following requirements:

• They served in active duty for six months
• They served as a reservist or National Guard member for six years
• They are reservists or National Guard members who were called to active duty for at least 181 days
• They served in any branch of the military for 90 days during wartime
• They are the spouse of a military member who died during active duty
• They are the spouse of a military member who became disabled during duty

Once establishing eligibility for a VA loan based on their service or their spouse’s service in the U.S. military, the applicant would be expected to share similar documentation and financial data with a mortgage lender. Such information, including bank statements, credit report federal income taxes and W2 statements, helps determine qualification.