VA Loans: A Guide for MLOs
VA loans are mortgages guaranteed by the U.S. Department of Veterans Affairs for eligible service members, veterans, and surviving spouses. As an MLO, the headline you’ll quote borrowers is real: no down payment, no private mortgage insurance, and competitive rates. But the program has its own rules around entitlement and the funding fee, and getting those wrong slows down a file fast. Here’s the working knowledge you need.
Who actually qualifies for a VA loan?
The VA doesn’t lend money. It guarantees a portion of the loan, which lets approved lenders offer better terms. Eligibility comes down to service history, and the borrower proves it with a Certificate of Eligibility (COE).
Per the Department of Veterans Affairs, eligible borrowers generally include:
- Veterans who meet minimum active-duty service requirements
- Active-duty service members after a qualifying period of continuous service
- National Guard and Reserve members who meet service thresholds
- Surviving spouses of service members who died in the line of duty or from a service-connected disability (with conditions)
You can pull a COE through the lender portal in most loan origination systems, which is faster than asking the borrower to request it themselves. Don’t skip this — a missing or incorrect COE is one of the most common reasons a VA file stalls.
One honest caveat: eligibility doesn’t guarantee approval. The borrower still has to meet the lender’s credit and income standards and the property has to pass a VA appraisal. The guarantee protects the lender; it doesn’t override underwriting.
How does VA entitlement work?
Entitlement is the dollar amount the VA will guarantee on a borrower’s behalf. This is the part that trips up newer originators.
| Term | What it means |
|---|---|
| Basic entitlement | The baseline guarantee amount the VA assigns each eligible borrower |
| Bonus (tier 2) entitlement | Additional guarantee that supports larger loans |
| Full entitlement | Borrower has used none, or has restored what they previously used |
| Partial entitlement | Borrower has an active VA loan or a prior loss reducing available entitlement |
The key shift in recent years: borrowers with full entitlement have no VA loan limit. They can finance above the conforming threshold with no down payment, as long as the lender approves the loan amount. Borrowers with partial entitlement may need a down payment on higher loan amounts, because the VA’s guarantee only stretches so far.
When a borrower already has one VA loan, calculating remaining entitlement matters. Always confirm current figures and county limits directly through the VA rather than quoting numbers from memory.
What is the VA funding fee?
The funding fee is a one-time charge that keeps the program running without taxpayer cost. It’s a percentage of the loan amount and varies based on three things:
- Loan type (purchase, cash-out refinance, or IRRRL)
- Down payment amount (a larger down payment lowers the fee)
- Whether it’s the borrower’s first or subsequent use of a VA loan
Most borrowers roll the funding fee into the loan rather than paying it at closing. Set that expectation early so the disclosed loan amount doesn’t surprise anyone.
A point worth flagging to borrowers: veterans receiving VA disability compensation are typically exempt from the funding fee. Surviving spouses and certain Purple Heart recipients may also qualify for an exemption. Always verify exemption status through the COE — guessing here can cost the borrower thousands or create a compliance headache if you charge a fee that shouldn’t apply. Check current funding fee percentages on the VA’s site, since they’re set by statute and adjust periodically.
How do VA loans compare to conventional and FHA?
This table is the cheat sheet borrowers ask for most:
| Feature | VA Loan | Conventional | FHA |
|---|---|---|---|
| Down payment | $0 (full entitlement) | 3% minimum | 3.5% minimum |
| Mortgage insurance | None | PMI under 20% down | MIP (often for life of loan) |
| Upfront fee | Funding fee (rollable) | None | Upfront MIP |
| Credit flexibility | Generally lenient | Stricter | Lenient |
| Who’s eligible | Service-connected only | Anyone qualifying | Anyone qualifying |
The no-PMI feature is the biggest long-term savings, and it’s often underexplained at the kitchen table. A VA borrower putting nothing down still avoids the monthly insurance a conventional borrower with 10% down would pay.
What should you watch when originating a VA loan?
A few practical habits keep VA files clean:
- Order the COE early. It’s the foundation of the file.
- Confirm the property is the borrower’s primary residence. VA loans aren’t for investment properties or second homes.
- Respect the VA appraisal and Minimum Property Requirements. Health and safety issues can delay or kill a deal until they’re cured.
- Disclose the funding fee accurately on the Loan Estimate, including exemption status.
- Know the IRRRL (Interest Rate Reduction Refinance Loan) for streamlined refinances of existing VA loans — it’s a strong retention tool.
Like every product you originate, VA loans fall under the SAFE Act and your NMLS licensing obligations. If you’re newer to the business, the fundamentals in our MLO guide and the SAFE exam prep walkthrough are worth a refresher before you start quoting government-backed products.
Last updated: June 2026.
VA loans reward originators who learn the entitlement and funding-fee mechanics cold — the no-down-payment pitch is easy, but the file management is where deals are won or lost. Master the COE-to-close workflow and you’ll become the originator real estate agents recommend to their military and veteran clients. For more product breakdowns and licensing resources, browse the blog or check your state’s requirements on the MLO state pages.