CalculatorWhat Is a VA Loan?
A VA loan is a mortgage guaranteed by the U.S. Department of Veterans Affairs and offered by private lenders. The VA does not issue the loan itself; instead it backs a portion of it, which lets lenders extend exceptionally favorable terms to those who have served. Established as part of the 1944 GI Bill, the program has helped tens of millions of service members and veterans become homeowners, and it remains one of the most powerful benefits earned through military service.
0% Down Payment
The defining feature of a VA loan is true 100% financing. As long as the sale price does not exceed the home's appraised value, eligible borrowers can purchase with no down payment at all. There is no strict loan limit for borrowers with full entitlement, which means qualified veterans can finance higher-priced homes without the jumbo-loan hurdles that conventional buyers face. This removes the single biggest barrier to homeownership — the lump-sum down payment — for those who have earned the benefit.
The VA Funding Fee
Because there is no down payment and no mortgage insurance, the VA charges a one-time funding fee to sustain the program. For a first-time user with no down payment, the fee is currently 2.15% of the loan amount; it increases to 3.3% on subsequent uses, and it drops if you make a voluntary down payment of 5% or more. The fee can be rolled into the loan so you do not pay it out of pocket. Importantly, veterans who receive VA disability compensation, as well as certain surviving spouses, are exempt from the funding fee entirely.
No PMI — Ever
Conventional loans with less than 20% down require private mortgage insurance, and FHA loans carry MIP, both of which add to the monthly payment. VA loans have neither. Even with zero down, a VA borrower pays no monthly mortgage insurance, which frequently makes the VA payment the lowest of the three options for the same home price. Over a few years, skipping mortgage insurance can save thousands of dollars.
Eligibility: Who Qualifies
VA loans are reserved for those with qualifying service: active-duty members, veterans who meet time-in-service minimums, National Guard and Reserve members, and some surviving spouses. You confirm your eligibility by obtaining a Certificate of Eligibility (COE) from the VA, which your lender can usually pull electronically in minutes. Your entitlement — the amount the VA will guarantee — can also be restored after a previous VA loan is paid off, letting you reuse the benefit.
The Residual Income Requirement
The VA underwrites differently from other programs. Beyond a debt-to-income ratio, it requires a minimum "residual income" — the cash left each month after you pay taxes, your mortgage, and major recurring debts. The required amount scales with household size and your region of the country. This common-sense test ensures borrowers have breathing room in their budget and is a major reason VA loans consistently post some of the lowest foreclosure rates of any loan type. You can estimate yours with the VA Residual Income Calculator, then model your full payment with the calculator above.