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GlossaryMortgageLoan types

VA loan

2 min read
Short answer
A VA loan is guaranteed by the Department of Veterans Affairs for eligible service members, veterans and certain surviving spouses. It requires no down payment and carries no monthly mortgage insurance, which makes it the cheapest widely available mortgage for those who qualify. Most borrowers pay a one-time funding fee instead, which can be financed and is waived in some circumstances.

A VA loan is guaranteed by the Department of Veterans Affairs for eligible service members, veterans and certain surviving spouses. The VA does not lend; it guarantees a portion of the loan, which is what lets lenders offer terms available nowhere else.

For a borrower who qualifies, it is generally the best mortgage in the market.

What makes it different#

No down payment. Most eligible borrowers with full entitlement can finance the entire purchase price.

No monthly mortgage insurance. This is the part that gets underweighted. Every other low-down-payment route — FHA, conventional with PMI, USDA — carries a recurring insurance cost. VA does not. Over a full term that is a very large number.

Competitive rates, because the guarantee reduces lender risk.

The funding fee#

In place of ongoing insurance there is a one-time funding fee, charged as a percentage of the loan and normally financed into it.

It varies with down payment, whether this is a first or subsequent use, and service category. It is waived entirely for some borrowers, including many receiving compensation for service-connected disability — which is worth checking rather than assuming, because it is a meaningful sum.

Entitlement#

Eligibility is established with a Certificate of Eligibility, and the amount the VA will guarantee is the borrower's entitlement.

Entitlement is not consumed permanently. It is restored when the loan is repaid, and partial entitlement can support a second VA loan while a first is outstanding — relevant to service members relocating who intend to retain the previous property as a rental.

The rules here are genuinely fiddly and worth confirming with a VA-experienced lender rather than a general one.

Occupancy#

VA lending is for a primary residence. There is no VA investment-property loan.

As with FHA, a two- to four-unit property with the borrower occupying one unit satisfies the requirement, and rental income from the others may assist qualification.

Assumability, and why it matters now#

VA loans are assumable. A qualified buyer can take over the existing loan at its existing rate, subject to approval.

In a rising-rate market that is a significant asset attached to the property — a seller carrying a low-rate VA loan is offering something no new financing can match.

One trap: unless the assuming buyer is VA-eligible and substitutes their own entitlement, the seller's entitlement generally stays tied to the loan, limiting their ability to use it again. That needs settling before an assumption is agreed, not after.

Common questions

Do VA loans really require no down payment?
For most eligible borrowers with full entitlement, yes — financing up to the full purchase price. That is the single largest advantage of the programme and it is genuine, not a marketing simplification.
Is there mortgage insurance on a VA loan?
No monthly mortgage insurance at all, which is unique among low-down-payment options. Most borrowers instead pay a one-time funding fee, which can be financed into the loan and is waived for some borrowers, including many with service-connected disabilities.
Can a VA loan be assumed?
Yes, which becomes valuable when rates rise — a buyer can take over an existing low-rate VA loan on approval. The seller's entitlement usually stays tied up unless the buyer is also VA-eligible and substitutes their own, which is a detail worth settling before agreeing to an assumption.
Keep reading
Conventional loan
A mortgage not insured or guaranteed by a government agency, priced on the borrower's credit and equity and following private investor guidelines.
FHA loan
A mortgage insured by the Federal Housing Administration, allowing lower credit scores and small down payments in exchange for mandatory insurance premiums.
Assumable mortgage
A mortgage a qualified buyer can take over from the seller on its existing terms, keeping the original interest rate rather than obtaining new financing.