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VA Loans 101: Mastering Homefront Finance

The VA loan is a great benefit available to service members, veterans and surviving spouses; but if you’ve ever felt overwhelmed by the process of utilizing the loan, rest assured you’re not alone! Many homebuyers new to the VA loan are initially intimidated. But take a deep breath! With the knowledge you need and the tools to get you there, we’re here to equip you so you can step into the dream of home ownership with confidence, knowing that you have everything you need for success. Are you ready to make your dream a reality? Let’s get started.

6 key items to consider in order to successfully execute your vision of utilizing the VA loan to its max capacity for your family.

  1. Understand the VA loan difference. Ever dreamed of buying a home with no down payment?! The VA loan has got your back! One of the most enticing features of the VA loan is the absence of a down payment requirement for most borrowers. VA loans also typically offer competitive interest rates and don’t require private mortgage insurance (PMI), which may mean your monthly payment with a VA loan will be lower than with a traditional mortgage. The VA loan also has more flexible credit score requirements and limits closing costs, making home ownership even more attainable to the service member and veteran community.
Loan Requirements
VA Loans
Conventional Loans
Property Type
Primary Home
Primary or second home, investment properties.
Minimum Down Payment
Zero in most instances
Usually at least 3%. Some lenders offer special zero-down loans.
Mortgage Insurance
No mortgage insurance. One-time VA funding fee of 1.25% to 3.3% of loan amount for purchase mortgages.
Private mortgage insurance usually required if down payment is less than 20%.
Minimum credit score
No minimum set by VA, but a 580-620 FICO score is a common lender requirement.
A 620 FICO score is typical.
Maximum debt-to-income ratio
Lenders will give more scrutiny if DTI is over 41%.
Ideally under 36%, but higher ratios can be accepted.
  1. Understand the VA loan difference. Ever dreamed of buying a home with no down payment?! The VA loan has got your back! One of the most enticing features of the VA loan is the absence of a down payment requirement for most borrowers. VA loans also typically offer competitive interest rates and don’t require private mortgage insurance (PMI), which may mean your monthly payment with a VA loan will be lower than with a traditional mortgage. The VA loan also has more flexible credit score requirements and limits closing costs, making home ownership even more attainable to the service member and veteran community.
  1. Check your eligibility. Generally, active-duty service members, veterans, certain Reservists, and National Guard members, along with some surviving spouses, may qualify for a VA loan. A couple of factors that play a role in eligibility are the length and nature of service and your discharge status. Not sure if you qualify? You can check your eligibility on the VA website here
  1. Know your budget. Just because you’re pre-approved for a certain dollar amount does not mean you can afford that dollar amount. A good rule of thumb is your full housing budget, including utilities, should never exceed 30% of your gross income. Here is a helpful affordability calculator that will get you started on the path to know how much house you can actually afford. Don’t forget to factor in your own unique financial situation when you consider affordability – other loans you may have (educational, auto, etc.), childcare, medical and educational expenses. Your grocery and entertainment budget will thank you later!
  1. Find the right lender and agent. Your real estate agent and your lender can make or break your home buying experience. Finding lenders and agents who are knowledgeable about the VA loan process can be key to a successful home buying journey. Plan to get pre-approved by your lender early so you’re ready to move quickly when the right house hits the market. You can look for local recommendations; or, if you’re not sure where to start consider these additional tips from Veterans United.
  1. Know the cost. You may be thinking, “The VA loan is 0% down. That means it will cost me nothing, right?!” Not necessarily. While the VA loan offers significantly lower up-front costs, you should still expect to be paying for a few things out of pocket. These may include the funding fee, appraisal, home inspection, closing costs, and earnest money. Before you walk away thinking home ownership is out of reach, know that some of these costs can be rolled into your loan. Here is a great breakdown of the costs.

Now that you’ve got some knowledge and tools to back you up, start searching for that new home with confidence! Here at ADU we care about more than just your finances. We’re committed to equipping you in your personal journey every step of the way, whether you find yourself currently in the military or in a time of transition. Looking for more resources? Take a look at what we provide:

Aaron Krol

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