VA Loans: The Military Benefit You Earned But Might Not Be Using

When James came to National Mortgage Home Loans, he was frustrated and ready to give up on buying a home.

"I'm an Army veteran. I served two tours in Iraq. I make $68,000 a year as a logistics manager. My credit score is 680. I have $12,000 saved up—I know it's not much, but I've been saving for two years.

"I want to buy a $240,000 house. Every lender I talk to says the same thing: 'You need at least $48,000 for the down payment and closing costs. Come back when you have that saved.'

"At the rate I'm saving, that'll take me another six years. By then, this $240,000 house will probably cost $300,000. I'm watching home prices rise faster than I can save, and I'm stuck paying $1,500/month in rent that builds zero equity.

"I've been told I qualify for something called a VA loan, but I don't really understand what that means or if it's actually better than a regular mortgage. Can you explain it to me?"

Here's what I told James—and what I wish every veteran, active-duty service member, and eligible spouse knew:

The VA loan might be the single most valuable financial benefit you earned through your military service. And most veterans either don't know about it or don't understand how powerful it actually is.

Let me explain exactly what VA loans are, how they work, why they're superior to almost every other mortgage option, and how James went from "six years away from homeownership" to "homeowner in 45 days."

What Is a VA Loan?

VA Loan = Veterans Affairs Home Loan Guarantee Program

A VA loan is a mortgage backed by the U.S. Department of Veterans Affairs, designed to help veterans, active-duty service members, and certain surviving spouses buy homes.

Critical point: The VA doesn't actually lend you money. The VA guarantees a portion of the loan, which allows private lenders (like banks and mortgage companies) to offer you incredibly favorable terms.

Think of it this way:

Regular mortgage: Lender takes all the risk if you default, so they require large down payments and charge higher rates to protect themselves.

VA loan: The VA tells the lender, "If this veteran defaults, we'll cover 25% of the loss." This guarantee reduces the lender's risk, allowing them to offer:

• Zero down payment
• No private mortgage insurance (PMI)
• More flexible qualification standards
• Competitive interest rates

This benefit exists because you served. You earned it.

Who Qualifies for VA Loans?

You might be eligible for a VA loan if you fall into any of these categories:

Active Duty Service Members

You qualify if:

• You've served 90 consecutive days of active duty during wartime, OR
• You've served 181 days of active duty during peacetime

Wartime periods include:

• WWII: September 16, 1940 – July 25, 1947
• Korean War: June 27, 1950 – January 31, 1955
• Vietnam War: August 5, 1964 – May 7, 1975
• Persian Gulf War: August 2, 1990 – present

Yes, we're technically still in a wartime period, which means active-duty service members can qualify after just 90 days of service.

Veterans

You qualify if:

• You served and were discharged under conditions other than dishonorable
• You meet the minimum service requirements (90 days wartime or 181 days peacetime)

Discharge status matters:

• ✅ Honorable discharge: Fully eligible
• ✅ General discharge: Eligible
• ✅ Other Than Honorable (OTH): May be eligible (case-by-case review)
• ❌ Dishonorable discharge: Not eligible
• ❌ Bad Conduct discharge: Usually not eligible

National Guard and Reserve Members

You qualify if:

• You've completed 6 years of service in the Selected Reserve or National Guard, OR
• You were discharged due to service-connected disability before completing 6 years

Surviving Spouses

You qualify if:

• Your spouse died in service or from a service-connected disability, AND
• You have not remarried (or if remarried, that marriage ended), OR
• You're the surviving spouse of a service member who is missing in action or a prisoner of war

Important: You Don't Lose Eligibility

Common misconception: "I used a VA loan before, so I can't use it again."

TRUTH: You can use your VA loan benefit multiple times throughout your life. After you pay off or sell a home purchased with a VA loan, your entitlement is restored and you can use it again.

Some veterans can even have two VA loans at the same time if they have remaining entitlement.

The VA Loan Advantages: Why This Benefit Is Extraordinary

Let's compare VA loans to conventional and FHA loans so you see exactly why this benefit is so valuable.

Advantage #1: Zero Down Payment

VA Loans:

• Down payment required: $0
• You can finance 100% of the home's purchase price

Conventional Loans:

• Minimum down payment: 3-5% ($7,200-$12,000 on a $240,000 home)

FHA Loans:

• Minimum down payment: 3.5% ($8,400 on a $240,000 home)

James's situation:

• Home price: $240,000
• VA loan down payment: $0
• Conventional would require: $12,000-$48,000 (5-20%)
• James can buy NOW instead of saving for 6 more years

Advantage #2: No Private Mortgage Insurance (PMI)

This is massive and almost nobody talks about it.

What is PMI?

When you put down less than 20% on a conventional loan, you pay Private Mortgage Insurance—an insurance policy that protects the lender if you default.

Conventional loan with 5% down on $240,000:

• PMI cost: $150-$200/month
• Annual PMI: $1,800-$2,400
• You pay PMI until you reach 20% equity (typically 8-12 years)
• Total PMI paid: $18,000-$28,800

FHA loan with 3.5% down on $240,000:

• Upfront MIP: $4,200 (1.75% of loan amount, rolled into loan)
• Monthly MIP: $165/month
• You pay MIP for the entire life of the loan (30 years)
• Total MIP paid: $59,400 + $4,200 = $63,600

VA loan with 0% down on $240,000:

• PMI cost: $0
• MIP cost: $0
• Total saved: $18,000-$63,600 over the life of the loan

Instead of PMI, VA loans charge a one-time VA Funding Fee (which we'll discuss later—but it's far cheaper than PMI/MIP).

Advantage #3: Lower Interest Rates

VA loans typically have interest rates 0.25-0.5% lower than conventional loans.

Current market example (late 2024/early 2025):

• Conventional 30-year fixed: 6.875%
• VA 30-year fixed: 6.375%

On a $240,000 loan over 30 years:

• Conventional at 6.875%: Monthly payment = $1,578
• VA at 6.375%: Monthly payment = $1,497
• Savings: $81/month ($972/year, $29,160 over 30 years)

Advantage #4: More Flexible Credit Requirements

VA Loans:

• No official minimum credit score (VA doesn't set one)
• Most lenders require 580-620+
• More flexibility for veterans with past credit issues
• More consideration of extenuating circumstances

Conventional Loans:

• Minimum credit score: 620 (for most programs)
• 640-660+ for best rates
• Less flexibility for past issues

FHA Loans:

• Minimum credit score: 580 (with 3.5% down)
• 500-579 (with 10% down)

VA loans are more forgiving of past credit problems, recognizing that deployments and military life can complicate financial management.

Advantage #5: Seller Can Pay ALL Closing Costs

VA loans allow:

• Seller to pay up to 100% of buyer's closing costs
• Seller to pay off buyer's debt to help with qualification
• Seller to pay buyer's VA funding fee

In a buyer's market, this is huge:

James's closing costs: ~$6,000 In negotiations, seller agreed to pay $4,000 of closing costs James's out-of-pocket at closing: $2,000 (instead of $6,000)

Advantage #6: No Prepayment Penalty

You can pay off your VA loan anytime without penalty. Want to pay extra toward principal? Go ahead. Refinance to a better rate? No problem.

Some mortgages charge prepayment penalties. VA loans never do.

Advantage #7: VA Protections

The VA provides oversight and protections that other loan types don't:

• Limits on lender fees
• Free foreclosure avoidance assistance
• Assistance if you run into financial trouble
• Strict appraisal requirements (protects you from buying a lemon)

The VA Funding Fee: The One "Cost" of VA Loans

VA loans aren't completely free. There's a VA Funding Fee—a one-time fee that helps fund the VA loan program for future veterans.

VA Funding Fee Rates (2024-2025)

For first-time VA loan users:

• 0% down payment: 2.15% of loan amount
• 5-9% down payment: 1.5% of loan amount
• 10%+ down payment: 1.25% of loan amount

For subsequent VA loan use:

• 0% down payment: 3.3% of loan amount
• 5-9% down payment: 1.5% of loan amount
• 10%+ down payment: 1.25% of loan amount

Who's exempt from the VA Funding Fee:

• Veterans receiving VA disability compensation
• Veterans eligible to receive disability but receiving retirement pay instead
• Surviving spouses receiving DIC (Dependency and Indemnity Compensation)

How it's paid:

The VA Funding Fee is typically rolled into your loan amount, so you don't pay it upfront in cash.

James's example:

• Home price: $240,000
• Down payment: $0
• Base loan amount: $240,000
• VA Funding Fee (2.15%): $5,160
• Total loan amount: $245,160

Is the funding fee worth it?

Absolutely. Compare it to PMI:

Conventional loan with 5% down:

• PMI: $18,000-$28,800 over 8-12 years
• Plus you needed $12,000 down payment upfront

VA loan:

• VA Funding Fee: $5,160 (rolled into loan, spread over 30 years)
• Down payment: $0

VA loan is still massively cheaper, even with the funding fee.

James's Journey: From "Impossible" to "Homeowner"

Let's walk through exactly how James went from thinking he was 6 years away from homeownership to closing in 45 days.

James's Starting Position

Financial Profile:

• Annual income: $68,000 ($5,667/month)
• Credit score: 680
• Savings: $12,000
• Monthly debts: $450 (car payment + student loan)
• Desired home: $240,000

Why Traditional Financing Didn't Work

Conventional loan requirements:

• Down payment (5%): $12,000
• Closing costs: $6,000
• Total cash needed: $18,000
• James has: $12,000
• Shortfall: $6,000

Plus, with only 5% down, James would pay $175/month in PMI for 10+ years.

FHA loan requirements:

• Down payment (3.5%): $8,400
• Closing costs: $6,000
• Total cash needed: $14,400
• James has: $12,000
• Shortfall: $2,400

Plus, James would pay $165/month in MIP for the entire 30-year loan term.

VA Loan Solution

Step 1: Certificate of Eligibility

We helped James obtain his Certificate of Eligibility (COE) from the VA, proving his eligibility for the VA loan benefit.

How to get your COE:

• Online: Through eBenefits portal (fastest—instant for most veterans)
• Through lender: We can pull it for you during the application
• By mail: VA Form 26-1880 (slowest—4-6 weeks)

James got his COE online in 10 minutes.

Step 2: Loan Application & Approval

Loan details:

• Purchase price: $240,000
• Down payment: $0
• VA Funding Fee: $5,160 (2.15%)
• Total loan amount: $245,160
• Interest rate: 6.375%
• Monthly payment (P&I): $1,528
• Taxes & insurance: $320/month
• Total monthly payment: $1,848

Qualification:

• Monthly income: $5,667
• Monthly debts: $450 (existing) + $1,848 (new mortgage) = $2,298
• DTI: 40.5%
• APPROVED (VA loans allow DTI up to 41% with compensating factors)

Step 3: Home Appraisal & VA Requirements

The VA requires a special appraisal to ensure:

• Property is safe and sanitary
• Property meets minimum property requirements (MPRs)
• Property is worth at least the purchase price

James's home appraised at $240,000 and met all VA requirements.

Step 4: Closing

James's closing costs:

• Appraisal: $550
• Credit report: $50
• Title insurance: $1,200
• Recording fees: $125
• Lender fees: $1,500
• Prepaid taxes and insurance: $2,400
• Total closing costs: $5,825

In negotiations, the seller agreed to pay $4,000 of closing costs (common in VA transactions).

James's out-of-pocket at closing: $1,825

James went from needing $18,000+ for conventional financing to needing less than $2,000 for VA financing.

James's Outcome

Month 1 as homeowner vs. Month 0 as renter:

As renter:

• Rent: $1,500/month
• Building equity: $0
• Building wealth: $0

As homeowner with VA loan:

• Mortgage payment: $1,848/month
• Building equity: ~$300/month (principal paydown)
• Building wealth: Yes
• Additional cost vs. rent: $348/month

For $348/month more than he was paying in rent, James:

• Owns his home
• Builds equity every month
• Benefits from appreciation
• Has stable housing costs (rent would keep increasing)
• Started building generational wealth

30 years from now:

• James will own a paid-off home worth $500,000-$600,000+ (conservative appreciation)
• His renter neighbor will have paid $540,000+ in rent and own nothing

The VA loan changed James's financial trajectory.

VA Loan Myths That Keep Veterans from Using This Benefit

Myth #1: "VA loans are only for first-time buyers"

FALSE.

You can use your VA loan benefit multiple times. After you pay off or sell a home bought with a VA loan, your entitlement is restored and you can use it again.

Some veterans can even have two VA loans at the same time if they have remaining entitlement.

Myth #2: "Sellers won't accept VA offers because they're too difficult"

PARTIALLY TRUE, BUT IMPROVING.

In hot seller's markets, some sellers prefer conventional or cash offers because:

• VA appraisals can be stricter
• VA buyers might ask sellers to pay closing costs
• Perceived as "more complicated"

Reality: VA loans are not materially more difficult than conventional loans. Education and good lenders (like National Mortgage Home Loans) have improved seller perception.

How to make your VA offer competitive:

• Write a strong offer (competitive price, reasonable terms)
• Get pre-approved (not just pre-qualified)
• Use an experienced VA loan officer who can reassure the seller
• Consider waiving seller-paid closing costs if you can afford them
• Include a letter explaining your service (personal connection helps)

Many sellers are honored to help a veteran buy their home once they understand who they're working with.

Myth #3: "VA loans take forever to close"

FALSE.

VA loans typically close in 30-45 days, the same as conventional loans. With an efficient lender and responsive borrower, we've closed VA loans in as little as 21 days.

Myth #4: "VA loans are only for low-income veterans"

FALSE.

There's no income limit for VA loans. Whether you make $40,000/year or $400,000/year, you can use your VA benefit.

The VA loan benefit is based on your service, not your income.

Myth #5: "You can only use a VA loan to buy a single-family house"

FALSE.

You can use a VA loan to buy:

• Single-family homes
• Condos (VA-approved)
• Townhouses
• Multi-family properties (2-4 units) as your primary residence

If you buy a duplex, triplex, or fourplex and live in one unit, you can rent out the other units. This is VA-approved house hacking.

Myth #6: "The VA Funding Fee makes VA loans expensive"

FALSE.

Even with the funding fee, VA loans are dramatically cheaper than conventional or FHA loans because:

• No PMI/MIP (saves $18,000-$63,000)
• Lower interest rates (saves $15,000-$30,000)
• No down payment required (frees up capital)

The VA Funding Fee is a small price for massive long-term savings.

Myth #7: "If I have bad credit, I can't get a VA loan"

FALSE.

While you do need decent credit, VA loans are more forgiving than conventional loans. Many lenders approve VA loans with credit scores as low as 580-600.

If you had credit problems during deployments or due to military life complications, VA underwriters are trained to consider these circumstances.

Special VA Loan Programs You Should Know About

VA Interest Rate Reduction Refinance Loan (IRRRL)

Also called a "VA Streamline Refinance," this allows you to refinance your existing VA loan to a lower rate with:

• No appraisal required (usually)
• No income verification required
• Minimal documentation
• Lower VA Funding Fee (0.5%)
• Fast closing (2-3 weeks)

When to use it:

If rates drop 0.5%+ below your current VA loan rate, an IRRRL can save you hundreds per month with minimal hassle.

VA Cash-Out Refinance

Allows you to refinance any existing mortgage (VA or non-VA) into a new VA loan and pull cash out of your equity.

Uses:

• Pay off high-interest debt
• Fund home improvements
• Invest in real estate
• Emergency reserves

Requirements:

• Must be refinancing to a VA loan
• Must meet credit and income requirements
• VA Funding Fee applies (2.15-3.3%)

Adapted Housing Grants

Veterans with service-connected disabilities may qualify for grants to:

• Purchase a home adapted for their disability
• Modify an existing home for accessibility
• Build a home with needed adaptations

Grant amounts (2024-2025):

• Specially Adapted Housing (SAH) Grant: Up to $101,754
• Special Housing Adaptation (SHA) Grant: Up to $20,387

VA Loan Limits: Do They Still Matter?

Prior to 2020: VA loans had limits based on county ($484,350 in most areas, higher in expensive markets).

Since 2020: VA loan limits are eliminated for veterans with full entitlement.

What this means:

If you have your full entitlement available (never used a VA loan, or previous VA loan is paid off), you can borrow any amount with no down payment required, as long as:

• You qualify based on income and credit
• The property appraises for the purchase price
• Lender is comfortable with the loan amount

Example:

You want to buy a $750,000 home in California:

• Old rules (pre-2020): Would require down payment on amount exceeding VA limit
• New rules (2020+): $0 down payment if you qualify based on income and credit

This is huge for veterans in expensive markets (California, New York, Hawaii, DC, etc.).

VA Loan Property Requirements: What the VA Appraisal Covers

The VA requires properties to meet Minimum Property Requirements (MPRs) to ensure they're safe, sanitary, and structurally sound.

VA Appraisal Checks For:

✅ Must have:

• Safe drinking water
• Working heating system
• Adequate roofing (at least 3 years of remaining life)
• Foundation free from significant defects
• No wood-destroying insects (termites)
• Safe electrical and plumbing systems
• Access to property via adequate roadway

❌ Cannot have:

• Peeling lead paint (in homes built before 1978)
• Defective or hazardous conditions
• Missing appliances that impact health/safety
• Insufficient ventilation

Common issues that delay VA closings:

1. Peeling paint (homes built before 1978): Must be scraped and repainted
2. Termite damage: Must be treated and repaired
3. Roof issues: If roof has less than 3 years of life, must be replaced
4. Water intrusion: Must be fixed
5. HVAC problems: Must be repaired or replaced

Seller's responsibility:

In most states, sellers must fix VA-required repairs to close the loan. In some states, buyers can pay for repairs (check your state rules).

How to Get Started with Your VA Loan

Step 1: Get Your Certificate of Eligibility (COE)

Three ways:

1. Online (fastest): eBenefits portal or VA.gov (instant for most veterans)
2. Through your lender: We can pull it during application (1-3 days)
3. By mail: VA Form 26-1880 (4-6 weeks)

Documents you'll need:

• DD Form 214 (discharge papers)
• Statement of Service (if still active duty)

Step 2: Find a VA-Experienced Lender

Not all lenders are equally experienced with VA loans. Work with a lender who:

• Specializes in VA lending
• Understands VA appraisal requirements
• Has strong relationships with VA appraisers
• Can help educate sellers/agents about VA loans
• Has track record of smooth VA closings

At National Mortgage Home Loans, we're VA loan specialists and we're honored to serve those who served.

Step 3: Get Pre-Approved (Not Just Pre-Qualified)

Pre-qualified: "Based on what you told us, you might qualify for $X"

Pre-approved: "We've verified your income, credit, and finances. You're approved for up to $X"

Pre-approval makes your offers stronger and speeds up closing.

Step 4: House Hunt

Work with a real estate agent experienced with VA loans. They should:

• Understand VA property requirements
• Help you find VA-eligible properties
• Write strong offers that compete with conventional buyers
• Navigate VA appraisal process

Step 5: Make Your Offer

Include in your offer:

• Pre-approval letter
• Proof of funds for closing costs
• Optional: Personal letter about your service
• Consider asking seller to pay closing costs (common in VA transactions)

Step 6: Navigate the VA Appraisal

The VA appraisal protects you from buying a defective property. If issues are found:

• Seller typically repairs them
• Or negotiates credits/price reduction
• Or buyer can walk away (if contingencies are in place)

Step 7: Close on Your Home

Bring:

• Cashier's check or wire transfer for closing costs
• Government-issued ID
• Proof of homeowner's insurance

You'll sign documents, get your keys, and become a homeowner.

Total timeline: 30-45 days typically

James's Message to Fellow Veterans

I asked James if he'd share advice for other veterans considering VA loans:

"I wasted two years thinking I couldn't afford to buy a home because I didn't have a huge down payment saved. I had no idea that the VA loan benefit I earned through my service would let me buy with zero down and no PMI.

"Here's what I wish I'd known sooner:

1. Your VA benefit is REAL and it's POWERFUL. It's not a small discount—it's a transformative financial tool.

2. You don't need 20% down. I was told by family and friends that 'you need 20% down to buy a house.' That's not true for VA loans.

3. The VA Funding Fee isn't a dealbreaker. Yes, it adds $5,000 to your loan, but you save $20,000-$60,000 by avoiding PMI. It's absolutely worth it.

4. Sellers WILL work with VA buyers. I was worried no one would accept my offer. My offer was accepted on the second house I bid on.

5. Work with lenders who know VA loans. National Mortgage Home Loans understood the VA process inside and out, which made everything smooth.

6. Don't wait. I waited two years trying to save money I didn't actually need. In those two years, homes appreciated 8% and I paid $36,000 in rent. I lost out on about $55,000 in wealth building by waiting.

If you're a veteran and you're renting while trying to save for a down payment, stop. Call a VA loan specialist today. You earned this benefit. Use it."

The Bottom Line: You Earned This Benefit—Use It

VA loans are arguably the best mortgage product available in America:

✅ Zero down payment
✅ No PMI/MIP
✅ Lower interest rates
✅ Flexible credit requirements
✅ Seller can pay closing costs
✅ No prepayment penalties
✅ Reusable benefit
✅ VA oversight and protections

You earned this benefit through your service. There's no shame in using it—there's only pride.

Whether you:

• Served one enlistment or a full career
• Deployed overseas or served stateside
• Were combat arms or support
• Separated as E-4 or O-6

Your service qualifies you for this benefit. Use it.

Too many veterans let misconceptions, stigma, or lack of knowledge prevent them from using the VA loan benefit. Don't be one of them.

Work with Lenders Who Honor Your Service

VA loans require lenders who:

✅ Specialize in VA lending (not just "offer" VA loans)
✅ Understand VA appraisal and property requirements
✅ Have strong relationships with VA appraisers
✅ Can educate sellers/agents about VA loans
✅ Treat veterans with the respect they deserve
✅ Have proven track record of successful VA closings

At National Mortgage Home Loans, we're honored to serve those who served:

• VA loan specialists on staff
• Hundreds of successful VA closings
• Fast COE processing
• Guidance through every step
• Competitive rates and terms

We understand that this isn't just a loan—it's a benefit you earned through your service.

Contact National Mortgage Home Loans today:

• Visit www.nmhl.us
• Call us for free VA loan consultation
• Ask about your VA eligibility and benefits

We speak your language: Hablamos español | نتحدث العربية (Arabic) | ܡܡܠܠܝܢܢ ܟܠܕܝܐ (Chaldean Aramaic) | ܡܡܠܠܝܢܢ ܐܬܘܪܝܐ (Assyrian) | Flasim shqip (Albanian)

Don't let another year pass paying rent while you try to save for a down payment you don't actually need. Your VA benefit is waiting for you.

"You served your country. Your country provided this benefit. Use it. You earned it."

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Helpful Resources:

• VA Home Loans: www.va.gov/housing-assistance/home-loans/
• Certificate of Eligibility: www.ebenefits.va.gov
• VA Loan Limits: www.benefits.va.gov/homeloans/purchaseco_loan_limits.asp
• National Mortgage Home Loans VA Team: www.nmhl.us