On this page
- What is a VA loan and how does the benefit work?
- How does a VA loan work, from COE to closing?
- Who can use a VA loan?
- How do you qualify for a VA loan? Residual income comes first
- What is the VA funding fee, and who doesn't have to pay it?
- What documents do I need for a VA loan?
- Do you need a down payment for a VA loan? Plus closing costs and seller concessions
- What are the benefits of a VA loan?
- What are the downsides of a VA loan?
- VA vs. FHA vs. conventional: which is better?
- Questions
- Sources
What is a VA loan and how does the benefit work?
VA usually doesn't make the loan. A private lender does, and VA guarantees part of it. That guaranty protects the lender. It's why VA loans can offer flexible down payment rules and no monthly mortgage insurance.
The rules come from federal law and regulation (38 U.S.C. Chapter 37 and 38 CFR Part 36) and from VA's guidance to lenders.
Two ideas drive almost everything about a VA loan. Eligibility is whether you've earned the benefit. Entitlement is how much of the benefit you have available to use.
Who is eligible for a VA loan? (Your Certificate of Eligibility)
Service requirements depend on when and how you served. For example, service members generally qualify after 90 days in a row of active duty. National Guard and Reserve members can qualify through qualifying active-duty service or six creditable years, among other paths. Certain surviving spouses may also qualify, including those receiving Dependency and Indemnity Compensation (DIC).
Your Certificate of Eligibility (COE) confirms it. I can usually request it for you online, or you can request it yourself through VA.
Is there a VA loan limit? (Entitlement explained)
If you have full entitlement, VA doesn't set a loan limit. For loans over $144,000, VA guarantees up to 25 percent of the loan amount. Your lender still decides how much to approve based on your credit, income, debts and savings.
You may have remaining entitlement instead. That happens if you have an active VA loan, or used entitlement that hasn't been restored. In that case, your available guaranty is based on your county's one-unit conforming loan limit. If it doesn't cover enough of the loan for the lender, you may need a down payment to make up the difference. I figure this out from your COE before we look at homes, so there are no surprises.
How does a VA loan work, from COE to closing?
- Confirm eligibility and entitlement. We pull your COE and check how much entitlement, if any, is already in use.
- Review income, credit and residual income. VA requires a residual income check on top of a debt-to-income ratio. More on that below.
- VA appraisal. A VA-assigned appraiser sets the home's reasonable value. They also check VA's minimum property requirements, which focus on the home being safe, structurally sound and sanitary. The result is called the VA Notice of Value.
- Underwriting approval. The lender reviews your file against VA requirements and its own guidelines.
- Closing. In Georgia, a closing attorney conducts the closing, and the attorney's firm handles title and the entire transaction.
Who can use a VA loan?
- Active-duty service members, including those who may move. VA loans can be used again after entitlement is restored. Some borrowers may have more than one VA loan when they have enough remaining entitlement.
- Veterans buying a first home or their next home.
- Guard and Reserve members who meet the service requirements.
- Eligible surviving spouses.
- Veterans with a service-connected disability rating, who generally don't pay the funding fee.
- Buyers of 2- to 4-unit homes who will live in one of the units.
- Veterans building a home. VA purchase loans can also be used to build a new home, depending on the lender. See construction-to-permanent loans.
How do you qualify for a VA loan? Residual income comes first
Most loan programs focus on DTI (debt-to-income ratio: how much of your monthly income goes to debt payments). VA uses it too. But VA's special test is residual income. That's the money left over each month after taxes, your new house payment, upkeep, utilities and your other monthly bills. The idea is simple. VA wants to know you'll have enough left to actually live.
How much residual income do you need for a VA loan?
Under 38 CFR 36.4340, the amount depends on loan size, family size and region. Georgia, Alabama and Florida are all in VA's South region. For loan amounts of $80,000 and above, the monthly guidelines are:
| Family size | South region monthly residual income guideline |
|---|---|
| 1 | $441 |
| 2 | $738 |
| 3 | $889 |
| 4 | $1,003 |
| 5 | $1,039 |
| Over 5 | Add $80 for each additional member, up to a family of seven |
Family size counts everyone in the household. That includes a spouse who isn't on the loan and other dependents. It can be reduced in limited cases, such as a non-borrowing spouse with verified steady employment.
Is 41 percent a hard limit on a VA loan?
No. VA's debt-to-income standard is 41 percent or less, but a higher ratio can still be approved. If residual income beats the guideline by at least 20 percent, no extra supervisor review or written justification is needed. Otherwise, a ratio above 41 percent needs a justification signed by the underwriter's supervisor. In real life, strong residual income can carry a file that looks heavy on paper.
Hypothetical illustration — not a quote, offer or commitment to lend.
A veteran in Georgia with a household of four needs residual income of $1,003 a month on a loan of $80,000 or more. Twenty percent above that is about $1,204.
Say the file shows $1,400 in residual income. That beats the guideline by more than 20 percent. So a debt-to-income ratio above 41 percent wouldn't need the extra supervisor justification under 38 CFR 36.4340. Lender guidelines still apply.
What credit score do you need for a VA loan?
VA does not set a minimum credit score. Lenders do, and those minimums vary. VA underwriting looks at your overall credit pattern. Waiting periods after bankruptcy or foreclosure are generally shorter than with conventional loans. If you've had a credit event, bring me the dates and I'll check them against current requirements.
What is the VA funding fee, and who doesn't have to pay it?
Instead of monthly mortgage insurance, most VA loans have a one-time funding fee. The amount depends on the loan type and loan amount. For some loan types, it also depends on whether it's your first use and how much you put down.
You can pay it at closing or add it into the loan. On purchase and construction loans, it's the only closing cost that can be added into the loan.
You don't pay the funding fee if you are:
- A veteran receiving VA compensation for a service-connected disability
- Eligible for that compensation but receiving retirement or active-duty pay instead
- A surviving spouse receiving Dependency and Indemnity Compensation
- A service member with a proposed or memorandum rating, issued before closing, saying you're eligible for compensation based on a pre-discharge claim
- An active-duty service member who provides evidence of a Purple Heart on or before closing
Heads up: If you have a disability claim pending, tell me right away. If you're later awarded compensation with an effective date before your closing, you may be able to get the funding fee refunded. A proposed or memorandum rating issued after closing doesn't qualify.
What documents do I need for a VA loan?
- Certificate of Eligibility (I can usually get this for you)
- DD-214 for veterans, or a statement of service for active-duty members, if needed for the COE
- Pay stubs, W-2s or Leave and Earnings Statements
- VA benefit award letter, if you receive disability compensation
- Bank statements, with large deposits explained
- Information on everyone in your household, for the residual income family size
Do you need a down payment for a VA loan? Plus closing costs and seller concessions
VA loans have flexible down payment rules for eligible borrowers. A down payment may come into play if you have reduced entitlement, if you pay more than the home's appraised value, or if your lender's guidelines require one.
Sellers can pay your normal closing costs, and VA doesn't limit those. Separately, VA caps seller concessions at 4 percent of the home's reasonable value from the Notice of Value.
Concessions are extras the seller gives you at no cost, such as paying the funding fee, paying off your debts, or prepaying your hazard insurance. Normal closing costs paid by the seller don't count toward that cap. This difference matters when we write the offer, so I'll help your agent set it up correctly.
What are the benefits of a VA loan?
- No PMI or MIP.
- No VA loan limit with full entitlement. VA loans can go above conforming limits, subject to lender approval.
- Residual income-based approval that looks at what you can really afford.
- Funding fee exemptions for disabled veterans and others.
- No prepayment penalty.
- A benefit you can use again. Entitlement is restored when the loan is paid off and the home is sold, or when another eligible veteran takes over (assumes) the loan and swaps in their entitlement.
- Refinance options, including the Interest Rate Reduction Refinance Loan (IRRRL) for existing VA loans and VA cash-out refinancing.
What are the downsides of a VA loan?
- Only for the home you live in. You must plan to live in the home.
- Funding fee for borrowers who aren't exempt.
- Minimum property requirements can lead to required repairs.
- Condos must be in VA-approved projects.
- Entitlement stays tied up if you keep a VA-financed home as a rental. That can affect your next purchase.
- Lender overlays. Credit score and other requirements vary by lender.
VA vs. FHA vs. conventional: which is better?
| VA | FHA | Conventional | |
|---|---|---|---|
| Who's eligible | Eligible veterans, service members, certain surviving spouses | Any qualified borrower | Any qualified borrower |
| Mortgage insurance | None; funding fee unless exempt | Upfront and yearly MIP | PMI when required; can be cancelled |
| Loan limit | None with full entitlement | County FHA limits | Conforming limits; jumbo above |
| Key affordability test | Residual income and DTI | DTI via TOTAL Scorecard | DTI via DU or LPA |
| Seller concessions | 4% of reasonable value cap; normal closing costs not included | HUD limits on interested party contributions | Limits vary by occupancy and LTV |
| Occupancy | Home you live in | Home you live in | Home you live in, second home, rental |
Compare your options with the mortgage payment calculator or the affordability calculator.
Common questions about va loans
Is there a VA loan limit in 2026?
If you have full entitlement, VA doesn't set a loan limit. Your lender decides how much to approve based on your credit, income and savings. If you only have remaining entitlement, your available guaranty is based on your county's one-unit conforming loan limit.
Who is exempt from the VA funding fee?
These groups don't pay it: veterans receiving compensation for a service-connected disability; those eligible for compensation but receiving retirement or active-duty pay instead; surviving spouses receiving DIC; service members with a qualifying proposed or memorandum rating issued before closing; and active-duty members who show evidence of a Purple Heart on or before closing.
What is VA residual income?
It's the money left over each month after taxes, housing costs, upkeep, utilities and other debts. VA sets guidelines by region, family size and loan amount under 38 CFR 36.4340. In the South region, which includes Georgia, Alabama and Florida, the guideline for a family of four on a loan of $80,000 or more is $1,003 a month.
Can my debt-to-income ratio be over 41 percent on a VA loan?
Yes. VA's standard is 41 percent or less, but a higher ratio can be approved. If residual income beats the guideline by at least 20 percent, VA doesn't require the extra supervisor justification. Lenders may have their own limits.
How much can a seller contribute on a VA loan?
Sellers can pay your normal closing costs with no VA limit. Seller concessions, like paying your funding fee or paying off debts, are capped at 4 percent of the home's reasonable value.
What credit score do I need for a VA loan?
VA doesn't set a minimum credit score. Lenders set their own minimums, which vary.
Can I use my VA loan more than once?
Yes. Entitlement can be restored after the loan is paid in full and you no longer own the home. It can also be restored when an eligible veteran takes over your loan and swaps in their entitlement. There's also a one-time restoration option in certain cases. Some borrowers can have more than one VA loan at once if they have enough remaining entitlement.
Can I buy a multi-unit property with a VA loan?
Yes. VA allows homes with up to four units, as long as you live in the home.
Can I build a home with a VA loan?
VA purchase loans can be used to build a new home, but it depends on the lender. See my page on construction-to-permanent loans.
This information is general education and may not reflect every lender's or investor's guidelines. Guidelines change; verify current requirements for your situation. Subject to credit approval, underwriting, program guidelines and property eligibility. Not a commitment to lend.