VA loans are mortgages for active or retired members of the military and their spouses, backed by the US Department of Veterans Affairs. A VA loan usually offers more favorable terms than a traditional mortgage including a lower interest rate and no down payment. If you’re an eligible prospective buyer, a VA loan could be an appealing option.
What are VA loans?
VA loans are home loans that are backed by the US Department of Veterans Affairs. The VA doesn’t actually lend the money, but rather insures the loan, in case the borrower fails to pay the money back. VA loans don’t require borrowers to make a down payment. They do include a VA funding fee -- between 1.4% and 3.6% of the loan -- which is determined according to how much you put down and whether you’ve taken out a VA loan before. A borrower can roll that fee into the loan amount, eliminating the upfront payment but adding long-term costs.
Who qualifies for a VA loan?
To find out if you qualify for a VA loan, you’ll need to request your Certificate of Eligibility from the VA via the administration’s eBenefits portal. While eligibility requirements vary based on service dates, the general requirements include:
- That current members are active for at least 90 days of continuous service;
- That veterans served for at least 181 continuous days of service (or fewer if you were discharged for a disability due to your service);
- That National Guard members served for 90 days of active-duty service or 6 years of service followed by an honorable discharge.
If your spouse died during service, you are also likely to qualify for a VA loan.
Current VA loan rate trends
Mortgage rates increased at the fastest pace in three decades in 2022, as the Federal Reserve repeatedly raised benchmark interest rates. Keep in mind that although VA loans have lower rates than conventional loans, they still rise and fall with overall rate trends. Regardless of the current economic conditions and state of the real estate market, locking in the lowest mortgage rate possible should always be your goal when shopping for a home.
VA loan versus 30-year fixed loan
A VA loan isn’t the only option for financing a home purchase. Even if you’re a qualifying service member or veteran, you can also compare conventional loans and FHA loans. Each of these loans can help you buy a house. VA-backed loans tend to offer lower borrowing costs, however, as well as more flexible credit requirements. Here’s a rundown of how these different types of mortgages stack up:
Comparison of mortgage types
| VA loans | FHA loans | Conventional loans | |
| Minimum down payment | None | 3.5% of purchase price (or 10% if your credit score is between 500 and 579) | 3% of purchase price |
| Minimum credit score | None, although you’ll need to meet a lender’s requirements | 580, although some lenders will accept as low as 500 | 620 |
| Mortgage insurance requirement | None | Upfront premium, plus an annual premium for the life of the loan in most cases | Required until you accumulate 20% equity in the home |
| Additional fees to note (other than closing costs) | Funding fee of 1.4% to 3.6% of loan amount | None | None |
How to apply for a VA loan
1. Request your Certificate of Eligibility: You’ll need your COE before proceeding with an official application for a VA loan. Getting one is easy through the VA’s eBenefits portal. If you have questions about the process, call 877-827-3702 to talk to a federal home loan specialist. The call center is open from Monday through Friday, 8:00 a.m. to 6:00 p.m. ET.
2. Know your loan limits: There is no limit for first-time home buyers; if you have used a VA loan before, there is a certain threshold based on the county where you’re hoping to buy.
3. Get preapproved: A preapproval letter can help set the stage to make an offer on a home. It will demonstrate to sellers that you’re a qualified buyer.
4. Compare multiple lenders: Every lender is different, and some companies offer special incentives for VA borrowers. While it’s important to compare rates, make sure you’re looking for other offers such as discounted appraisal fees and lender fees.
5. Have the property appraised: The VA’s appraisal standards are a bit more rigorous than for a conventional loan, so you might not be able to buy a fixer-upper. It will need to meet a certain set of minimum property conditions.
6. Close on the loan: After a lender officially approves your application, you’ll need to close on the loan, which involves signing a lot of documents and paying for your closing costs.
Pros of a VA loan
- No down payment required: Almost all types of home loans require a down payment, but if you take out a VA loan you can put 0% down to buy a home.
- Lower credit score requirements: Most conventional loans require a credit score of 620, but some lenders accept lower credit scores with VA loans.
- Lower interest rates: VA loans generally have lower interest rates and APRs than conventional loans.
- No mortgage insurance is required: With conventional loans, when you make a down payment less than 20%, you’re typically required to get private mortgage insurance, which can add hundreds of dollars to your monthly mortgage payment. With a VA loan, no PMI is required, no matter the size of your down payment.
Cons of a VA loan
- Narrow eligibility requirements: If you aren’t an active service member, retired service member or the spouse of one, you don’t qualify for a VA loan. You must provide a Certificate of Eligibility to qualify.
- VA funding fee: There is a one-time funding fee that other types of loans don’t require.
- Primary residences only: In most cases, you can only use a VA loan to buy a primary residence and not a second home or an investment property.
Current mortgage and refinance rates
| Product | Interest rate | APR |
|---|---|---|
| 30-year fixed-rate | 6.94% | 6.96% |
| 30-year fixed-rate FHA | 6.15% | 7.07% |
| 30-year fixed-rate VA | 6.32% | 6.43% |
| 30-year fixed-rate jumbo | 6.99% | 7.01% |
| 20-year fixed-rate | 6.84% | 6.87% |
| 15-year fixed-rate | 6.27% | 6.30% |
| 15-year fixed-rate jumbo | 6.36% | 6.37% |
| 5/1 ARM | 5.77% | 7.45% |
| 5/1 ARM jumbo | 5.67% | 7.38% |
| 7/1 ARM | 6.47% | 7.35% |
| 7/1 ARM jumbo | 6.68% | 7.25% |
| 10/1 ARM | 6.73% | 7.28% |
| 30-year fixed-rate refinance | 7.07% | 7.09% |
| 30-year fixed-rate FHA refinance | 6.23% | 7.15% |
| 30-year fixed-rate VA refinance | 6.39% | 6.60% |
| 30-year fixed-rate jumbo refinance | 7.15% | 7.16% |
| 20-year fixed-rate refinance | 7.00% | 7.03% |
| 15-year fixed-rate refinance | 6.34% | 6.37% |
| 15-year fixed-rate jumbo refinance | 6.40% | 6.42% |
| 5/1 ARM refinance | 5.71% | 7.31% |
| 5/1 ARM jumbo refinance | 5.64% | 7.08% |
| 7/1 ARM refinance | 6.38% | 7.37% |
| 7/1 ARM jumbo refinance | 6.59% | 7.27% |
| 10/1 ARM refinance | 6.79% | 7.32% |
We use information collected by Bankrate, which is owned by the same parent company as CNET, to track daily mortgage rate trends. The above table summarizes the average rates offered by lenders across the country.
FAQs
A VA loan interest rate is determined by a range of factors that impact all home loans: Your credit score, the size of your down payment and your debt-to-income ratio. But VA rates are also impacted by broader economic conditions. As the interest rates set by the Fed move up and down, expect to see VA rates follow a similar trajectory.
As with all home loans, shopping around with different mortgage lenders is critical to securing the lowest mortgage rate possible. The more lenders you interview, the greater the likelihood you’ll find a lower rate. According to Freddie Mac, prospective homeowners can save an average of $1,500 over the life of their loan just by getting one extra quote, and an average of $3,000 by getting five quotes.
Yes, you can refinance with a VA loan. You can borrow more money based on your home equity with a VA cash-out refinance, or you can opt for a VA IRRRL – an Interest Rate Reduction Refinance Loan – to score a lower interest rate that saves you money. It’s important to note that the funding fee on an IRRRL is just 0.5% of the loan amount (or 1.0% for unaffixed manufactured homes).
If you take out a VA loan you’ll have to pay a one-time funding fee when you close on your home. You can pay the fee upfront or finance it over time by rolling it into your mortgage. The amount of the fee will depend on the type of loan and the size of the loan. For instance, if your down payment is less than 5%, your fee will cost 2.3% of your loan. If you make a down payment between 5% and 10%, the fee will only be assessed at 1.65% of your loan; if you put down 10%, this fee is 1.4%.
There are some exceptions to the VA loan funding fee requirement. For example, an active duty service member who has received a Purple Heart does not have to pay the funding fee. Keep in mind, however, that you’ll still have to pay other standard lender fees that all buyers must pay when purchasing a house, such as closing costs.
More mortgage tools and resources
You can use CNET’s mortgage calculator to help you determine how much house you can afford. The CNET mortgage calculator factors in variables like the size of your down payment, home price and interest rate to help you figure out how large of a mortgage you may be able to afford. Using the CNET mortgage calculator can also help you understand how much of a difference even a slight increase in rates makes in how much interest you’ll pay over the lifetime of your loan.
