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    Money and Debt

    VA Purchase Loans

    Lenders offer competitive benefits for service members through a VA Purchase Loan. A Purchase Loan may be used to buy, build, or improve a home. It may also come with the benefit of not requiring a down payment.

    Who is eligible for a VA Purchase Loan?

    Service members who meet the following requirements are eligible:
    • Qualify for a Certificate of Eligibility (COE)
    • Meet the VA's and the lender's standards for credit, income, and any other requirements, and
    • Will live in the home they are buying with the loan

    What are the benefits for a VA Purchase Loan?

    No down payment
    If the sales price is not higher than the home’s appraised value, there may be no need to place a down payment.
    Better terms and interest rates
    When compared to other loans from private banks, mortgage companies, or credit unions.
    The ability to borrow up to the conforming loan limit
    The Federal Housing Financing Agency (FHFA) establishes baseline conforming loan limits for mortgages. Under a VA Purchase Loan, service members may borrow up to the limit without making a down payment. If they make a down payment, they may be able to borrow more than this amount. Click here to Learn about VA Home Loan limits
    No need for Private Mortgage Insurance (PMI) or Mortgage Insurance Premiums (MIP)
    VA Purchase Loans do not require PMI or MIP. These two are a type of insurance that protects the lender if the borrower does not pay their mortgage. It is required on conventional loans if there is a down payment of less than 20% of the total mortgage amount.
    Fewer closing costs
    VA Purchase Loans have fewer closing costs which may even be paid by the seller.
    No prepayment fees
    Unlike other loans there is no penalty for borrowers paying the loan off early.

    What can I use a VA Purchase Loan for?

    Building or Improving a home
    • Build a new home
    • Adding new features to a newly purchased home to make it more energy efficient
    Purchasing a home

    How can I use a VA Purchase Loan to build a new home?

    Service members may use a VA Purchase Loan to build a new home on property they already own or that they want to buy as part of the loan. There are 2 ways to build a new home using a VA Home Loan:
    Requesting a construction loan while applying for a VA Purchase Loan
    Requesting a construction loan while applying for a Cash-Out Refinance Loan.
    Construction loan
    Not all lenders are willing or able to offer construction loans. A project like building a home requires more consideration than a regular purchase loan.

    The lender is responsible for all aspects of project management and may set limitations.

    The VA will not guarantee the project until completion of the project.
    Contruction loans are closed before the start of construction.
    Service members do not have to make payments on the loan until after construction is complete.
    The first payment may be postponed for up to 1 year.
    For Example
    If the loan was made for 30 years, and building the house took 6 months, the loan now must be repaid in 29 years and 6 months. The payments may be distributed evenly or paid later as a lump sum.

    Can I use a VA Purchase Loan to buy or build a farm house?

    When applying for a VA Purchase Loan service members can request a farm residence loan to buy, construct, repair, alter, or improve a farm home that they intend to live in. The farm residence loan cannot cover:
    Farm residence loan cannot cover
    The value of the farmland,
    Barn, silo, or other outbuildings for farm operations, or
    Farm equipment or livestock
    Service members are allowed to start a business on the farm. However, the loan will only cover the residential part of the farmland. If a service member plans on using farming operation income to pay for the loan, the lender will need documentation such as operating budget(s), statements confirming purchase of farm equipment, estimates of earnings, and other items.

    How can I use a VA Purchase Loan to make alterations or repairs to my home?

    There are 2 ways to make alterations or repairs to a home using a VA Home Loan:
    Requesting an alteration or repair loan while applying for a VA Purchase Loan, or
    Requesting an alteration or repair loan while applying for a Cash-Out Refinance Loan.
    The costs of alterations or repairs will be included in the VA Purchase Loan and the improvements may be completed after closing the loan. Improvements must be found on similar properties of similar value in the area.

    Examples of common improvements include

    • roof
    • foundation
    • floors
    • plumbing
    • electrical
    • HVAC systems

    While there is no requirement for the service member to put any money down for the additional alteration or repair loan by the VA, some lenders might request the service member to pay 15% down.

    Service members may also choose the builder or contractor for the project, but to do so they must be registered with the VA or obtain VA builder identification number. The lender might also have additional requirements for the builder or contractor.

    How can I use a VA Purchase Loan to make my house energy efficient?

    When applying for a VA Purchase Loan, service members have the option to get an Energy Efficient Mortgage (EEM). This option may only be used before closing on a VA Purchase Loan. EEMs loans cover the cost of making energy efficiency improvements to a home. Up to $6,000 of improvements may be included in a Purchase Loan.


    Examples of energy efficiency improvements include

    • Solar heating and cooling systems,
    • Caulking and weather stripping,
    • Furnace efficiency modifications,
    • Clock thermostats,
    • New or more insulation,
    • Storm windows/doors,
    • Heat pumps,
    • and Other energy improvements may also be considered.
    Generally, efficiency improvements must be completed either before or 6 months after the loan closes.

    Are there any fees I must pay with my loan?

    Service members that are eligible for a Purchase Loan may have to pay a VA funding fee. This is a one-time fee that supports the program. Some service members or their spouses might be able to get this fee waived. The lender will also charge interest on the loan in addition to closing fees.

    Where can I learn more about VA Home Loans?

    The VA’s Home Loan page has dedicated information, resources, and guidance for how to get and use a VA Home Loan.

    More in-depth details and information can be found in the VA Home Loan Guaranty Buyer’s Guide.