The U.S. Department of Veterans Affairs (VA) offers a range of programs designed to support veterans and active-duty service members. Its home loans arm has to be one of the biggest value-adds for anyone who’s served in any branch of the Armed Forces. 

If you’ve met the minimum service requirement, you’re eligible to get a mortgage that’s either backed by the VA or directly from the VA. These home loans come with major perks like a 0% down payment, no mortgage insurance, and lower interest rates.  

What it means to get a VA home loan

If you get a VA home loan, you’re interacting with the VA in one of three ways. You’re getting a:

• VA-backed purchase loan
• VA-backed refinance
• Direct VA loan

The VA-backed options are much more common, so we’ll go over those first.

Broadly speaking, when the VA backs a loan, it means they essentially offer insurance to the mortgage lender. If you don’t repay what you borrow, the VA coughs up money to help the lender recoup some of its losses. 

This lowers the risk for the lender. Lenders love low risk, and they pass some benefits on to you. The VA’s backing is what makes it possible to get a VA home loan with 0% down, for example. 

Under the umbrella of VA-backed loans, you have three options:

• Purchase loans, which you can use to buy, improve, or build a house, townhouse, condo, etc.
• Interest-rate reduction refinance loans (IRRRLs), also called streamline refinances, which you can use to refinance a current VA loan into a new VA loan that delivers a financial benefit to you
• Cash-out refinance loans, which you can use to refinance any type of mortgage into a VA loan — and potentially take some cash out in the process

In addition to the three categories of loans that it backs, the VA also offers select mortgages directly. 

These loans are only available to Native American veterans/service members or veterans/service members who are married to a Native American. Direct VA loans can only be used to buy on tribal lands. With these kinds of loans, the VA acts directly as your mortgage lender. 

The four different types of VA home loan

Now that you have a general idea of how mortgages work when the VA is involved, let’s break all of that down on a more granular level:

Add-ons that expand how you can use different types of VA loans

The four categories we’ve laid out above technically cover each type of VA loan. You might have heard about a VA energy efficient mortgage or a VA construction loan — and think we left something out. 

We didn’t. The VA allows some of the above loan products to be used in specific ways, creating new opportunities for eligible borrowers. 

• Energy efficient mortgages (attached to purchase loans or IRRRLs): You can add up to $6,000 into your loan for energy efficient improvements. That VA categorizes this as an energy efficient mortgage (EEM), but it’s technically not its loan product. It has to be added to a purchase loan or IRRRL.
• Renovation loans (attached to purchase loans or cash-out refinances): The VA also backs money the homeowner plans to use to alter or repair their home. You can get a renovation loan backed by the VA through a purchase loan or cash-out refinance. 
• Construction loans (attached to purchase loans) The VA offers two options here: one-time close and two-time close construction loans. With the former, you close your construction loan and mortgage at the same time. With the latter, you set up your construction loan, then get your mortgage for the house once it’s built. 
• Farm residence loans (attached to purchase loans): You can use a VA purchase loan to buy, build, repair, alter, or improve a farm residence, provided you’ll live in it. 
• Manufactured home loans (attached to purchase loans): The VA lets you use a purchase loan to buy a manufactured home and its lot. The caveat here is that the home has to be affixed to the lot (e.g., on a permanent foundation). 

Finding the right type of VA home loan for you

Generally, if you’re a veteran or service member and you can qualify for a VA-backed loan, it’s a better financial move than getting any other type of mortgage or refinance.

If you’re hoping to buy a new house and you’re not Native American or married to a Native American, the best choice is the purchase loan. With its optional add-ons for construction, energy efficient improvements, and more, you can do a lot under this umbrella.

If you currently have a mortgage and you don’t want to move, a refinance can help you get a better rate, build more stability in your finances, or cash out some of your equity. Talking with a mortgage lender who offers VA refinances should help you figure out if an IRRRL or a cash-out refi is best. 

To give you a better idea of what’s on offer from lenders that work with the VA today, we have interest rate tables for both purchase loans and refinances.