VA Loans: What You Need To Know Before Applying

December 1, 2022


Column porch with American flag

If you’ve performed military service and you’re thinking about buying a home, there’s a good chance that you may be able to use a VA to finance your purchase. VA loans come with a host of benefits that make buying a home more affordable, but since they work differently than conventional loans, it’s a good idea to learn about them before applying. Here’s an overview of what you need to know.

What is a VA loan?

At its core, a VA loan is a loan that’s guaranteed by the Department of Veterans Affairs (VA). These loans are exclusively available to active-duty military members, veterans, and certain qualified surviving spouses.

Notably, the VA doesn’t originate loans. Rather, they guarantee a portion of the loan, which means they agree to repay a percentage in the event that the borrower defaults. That guarantee allows lenders to offer more lenient qualifying standards and more flexible loan terms to qualified military borrowers.

How VA loans work

Now that you know what a VA loan is, it’s important to understand that they work slightly differently than your standard conventional loan. Here’s a closer look at the factors that set them apart.

  • There’s military-specific eligiability requirements: Since VA loans are solely for military members, you have to meet certain service requirements to qualify. You can request a Certificate of Eligability (COE) from the VA to find out more about your specific entitlement benefits.
  • There’s no down payment: Depending on your eligibility, the lender may be willing to finance up to 100% of your home purchase.
  • There’s no mortgage insurance either: Most low-down-payment loan programs require the borrower to get mortgage insurance, which protects the lender in the event that the borrower defaults on the loan. However, the VA doesn’t have a similar requirement.
  • There’s a limit on administrative costs: Most lenders charge origination fees or other administrative fees to cover the costs associated with generating a new loan. For VA loans, these costs get capped at 1% of the loan amount.
  • There is a funding fee: In exchange for all these benefits, you will have to pay a funding fee, which helps offset the cost to taxpayers. This cost can typically be rolled into the loan, but it ranges between 0.5% and 3.6% of the loan amount.

Pros and cons of VA loans

Like any loan program, VA loans have their unique advantages and disadvantages. They’re outlined below for your consideration.


  • No down payment required: In many circumstances, the entire purchase price can be financed.
  • No PMI requirement: This is unike most conventional, low-down-paymemt loan programs.
  • No program-wide credit or income requirements: Although specific lenders may impose their own requirements.
  • Lender costs limited to 1%: You’ll only have to pay administrative costs equal to up to 1% of the loan amount.


  • The loan must be used to purchase a primary residence: You can’t use it to buy a second home or investment property.
  • There is a funding fee: It can be up to 3.6% of the loan amount.
  • The program is limited to military borrowers: You must meet certain service requirements to be eligible.
  • The processing times can be longer: Compared to those for other loan programs.

Get started today with a VA-approved lender

If you think a VA loan might be the right choice for you, get in touch with Premiere Natiowide Lending today. They can help you access your entitlement benefits to buy the home of your dreams.

Premier Nationwide Lending is an Equal Housing Opportunity lender. Sponsored by NTFN, Inc. 6201 West Plano Parkway, Suite 100, Plano, TX 75093 | NTFN NMLS 75333.

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