Home  »  Finance   »   VA Loan Basics

VA Loan Basics

Basics of the VA Loan

If you are new to your VA loan benefits, it’s good to review the requirements ahead of time so you can come to the home loan process ready to make informed choices about your home loan and your VA benefit. Here’s a primer on the VA home loan benefit that can help you get started.

No matter what kind of VA mortgage you need, there are some distinct benefits. The first is the zero downpayment option.

No money down on a home loan? That’s a major up-front and out-of-pocket expense veterans and currently serving military members typically don’t worry about with the VA mortgage process.

Aside from the no-money-down mortgage option, there are other advantages including (but not limited to) the following:

  • No VA requirement for private mortgage insurance
  • No penalty for early payoff of the VA loan
  • Lower interest rates compared to some conventional mortgages
  • Limits on closing costs the borrower can pay
  • You can re-use your VA mortgage benefit multiple times
  • VA refinance options are available including VA Streamline mortgages (see below)

A Word On VA Loan Down Payments

Some VA loans may require you to pay upfront when the appraised value is lower than the asking price of the home–you are free to walk away from the purchase without penalty if that is the case.

But for those who want to purchase the home anyway, the difference between the appraised value and the asking price must be paid in cash at closing time and cannot be financed.

Qualifying For A VA Mortgage

To qualify for the VA loan program, one must meet basic minimum requirements based on time served in the United States military or uniformed services such as the Commissioned Corps of the National Oceanic and Atmospheric Administration and Commissioned Corps of the Public Health Service.

These time-in-service requirements vary depending on when you joined. When you have served the minimum amount of time needed to qualify, you’ll need to apply for a VA Certificate of Eligibility (COE) which the lender will need to prove you are able to apply for a VA mortgage.

Getting your COE does NOT mean you are approved for a VA mortgage, but it does mean you are eligible to apply for such a loan with a participating lender.

An Important Note For Members of the National Guard

In 2024, the Department of Veterans Affairs removed an expiration date from a previously temporary policy offering VA loans to members of the National Guard with qualifying full-time service (90 days total with 30 days consecutively served on active duty.)

Beginning in 2024 National Guard members who qualify may apply for VA loans even if they applied in the past and were denied.

To get started you will need National Guard documents showing you performed full-time duty, for how long, and where, and you must provide a statement of lost time where applicable. All Guard members from any era of service who have enough full-time duty on the books may apply.

>> Interested in a no PMI, zero down payment possible home loan?  For a no-obligation, free consultation regarding your VA Loan eligibility, please go here.


Obtaining A VA COE

You can apply directly for a VA Certificate of Eligibility but many applicants choose to have their loan officer help them obtain it. If you want to apply directly with the VA by mail–you’ll need to fill out VA Form 26-1880 and mail it to the address listed on the form–or you can apply online using the VA eBenefits portal.

The VA official site says it’s also possible to apply through the VA LGY portal but you may need to ask your lender to help in such cases.

VA Loan Types At A Glance

There are a few basic VA loan benefits you should know about. They might seem a bit complicated at first until you get to know the program.

The first VA loan benefit you should know is the VA purchase loan, but there are also VA refinance loans, a special program for qualifying service members who want to buy land in tribal areas, and an add-on to the VA mortgage loan (purchase or refi) called the VA Energy Efficient Mortgage or VA EEM that allows extra loan funds for approved energy-saving upgrades to the home.

VA Purchase Loans

The “forward mortgage” options for VA loans. VA mortgages can be used to purchase a wide variety of properties including condo units, townhomes, farm residences (the residence only, you cannot use a VA mortgage to buy a farm business), manufactured housing, mobile homes, and even multi-unit properties up to four living units.

You should know that the requirements for a VA purchase loan include occupancy–no VA mortgage can be used to buy investment properties you don’t intend to occupy as your full-time residence. VA loan rules require you to declare in writing that the home will be your primary residence.

You can use a VA mortgage to buy a home in the United States or its territories and protectorates including:

  • Puerto Rico
  • Guam
  • Virgin Islands
  • American Samoa
  • Northern Mariana Islands

VA Refinance Loans

The VA refinance loan benefit comes in three basic forms. You can apply for a VA Cash-Out Refinance Loan which permits cash back to the borrower for any purpose acceptable to your lender.

There is a VA Interest Rate Reduction Refinance Loan (also option also known as the VA IRRRL for short.) This is a refinance loan that usually requires some tangible benefit to the borrower like a lower monthly payment or a lower interest rate.

You can also, as the third alternative, apply for a VA loan of either type and apply for the VA Energy Efficient Mortgage (VA EEM mentioned above) to include extra loan funds for approved energy-saving improvements.

The reason we list this as a “third loan” here? When applying for VA Cash-Out refinances, the EEM money cannot be used in an unrestricted way like the cash-out funds themselves. You must use any EEM loan money specifically for the approved projects you’ll be investing in to upgrade your home.

VA Direct Loans

Like the VA home loan program itself, VA Direct Loans are not offered to all applicants. These are the only VA loans offered directly from the VA itself rather than via a participating lender. In order to apply for a VA Direct Loan, also known as a VA Native American Direct Loan (VA NADL), you must either be a Native American or married to one AND meet all the following requirements:

  • You must intend to occupy the home you purchase with a VA NADL
  • Your tribal government has a Memorandum of Understanding (MOU) with the Department of Veterans Affairs;
  • You have a VA Certificate of Eligibility;
  • You meet VA income and credit requirements

VA Energy-Efficient Mortgages

The VA Energy-Efficient Mortgage or VA EEM is not a separate home loan option but rather an add-on to a VA refinance or purchase loan that provides extra funds for approved energy-efficient upgrades to the home you purchase or refinance with your VA mortgage.

VA EEMs may require the use of an Energy Consultant and the money you get with a VA EEM can only be used for the specific upgrades you and the lender agree on.

Those projects must be on the VA approved list, which includes but may not be limited to the following:

  • Solar heating and cooling systems
  • Weatherizing
  • Furnace efficiency
  • Insulation
  • Storm windows and doors
  • Heat pumps
  • Vapor barriers
  • Efficient thermostats
  • Ceiling upgrades
  • Attic or wall upgrades

Be sure to ask your loan officer about the EEM and how much adding this package to your loan will affect your monthly mortgage payment. VA loan rules state clearly that the borrower may be permitted to act as their own contractor to install certain upgrades themselves, but be advised that lenders may not permit this.

In cases where a lender does permit it, the borrower cannot use loan funds to “pay themselves” for the labor. These loan funds must only be used for materials when the borrower is doing their own work.

How much extra money is available to you via a VA EEM? The VA loan rules found in VA Pamphlet 26-7 state the VA mortgage can have the following amounts added depending on circumstances;

  • As much as $3,000 (determined only by “documented costs”)
  • As much as $6,000 IF the added loan funds do not result in an increase in monthly mortgage payment above the amount you would save on utility bills
  • More than $6,000 “subject to a value determination” by the Department of Veterans Affairs.

You don’t have to choose a VA EEM add-on to your loan, but the benefits of doing so over the long term may be worth considering.


Get a free, no-obligation consultation regarding your VA Loan with Veterans First!





About the author


Editor-in-Chief Joe Wallace is a 13-year veteran of the United States Air Force and a former reporter/editor for Air Force Television News and the Pentagon Channel. His freelance work includes contract work for Motorola, VALoans.com, and Credit Karma. He is co-founder of Dim Art House in Springfield, Illinois, and spends his non-writing time as an abstract painter, independent publisher, and occasional filmmaker.