VA Home Loans in 2026: Eligibility, Entitlement and the Funding Fee

The thing almost everyone gets wrong about VA loans is the credit score. Ask ten lenders what score you need and you will get numbers between 580 and 640, each delivered as though it were federal law. It is not. The Department of Veterans Affairs sets no minimum credit score at all. The underwriting regulation, 38 CFR §36.4340, does not mention a score anywhere. What it asks for is "a careful analysis of the available credit data", and it says in terms that the absence of a credit history "will not generally be viewed as an adverse factor." Every floor you have been quoted is that lender's own policy sitting on top of the programme.

That distinction runs through the whole loan. Some of what you are told is the VA's rule and cannot be negotiated — the funding fee percentages, the entitlement arithmetic, residual income, the occupancy certification. Some of it is a lender's commercial decision dressed as a rule — score floors, maximum debt-to-income, months of reserves, whether they will touch a manufactured home. The first category is fixed. The second varies enormously, which is why a VA decline is a weaker signal than a decline on anything else.

This guide separates the two: eligibility, entitlement properly explained, the current funding fee table and the outdated one still circulating, the truth about loan limits, residual income, the 41% debt-to-income standard and its regulatory exception, Minimum Property Requirements and occupancy. Every number below is labelled as either the programme's or a lender's.

Who this guide is for

• Veterans and service members using their entitlement for the first time
• Anyone who has been told a specific credit score is a "VA requirement"
• Borrowers who used entitlement on a previous home and are not sure what is left
• Veterans quoted a funding fee that looks higher than it should be
• Anyone with a service-connected disability rating, or a surviving spouse receiving Dependency and Indemnity Compensation, who may be exempt from the fee entirely
• Buyers above the local conforming limit wondering whether VA loan limits still apply to them
• Anyone whose debt-to-income is above 41% and has been told that is the end of it

Quick answer

A VA loan is a mortgage from an ordinary lender, guaranteed in part by the Department of Veterans Affairs, with no down payment and no mortgage insurance. Basic entitlement is US$36,000 under 38 U.S.C. §3703, and above US$144,000 the guaranty becomes 25% of the loan amount through second-tier entitlement. With full entitlement — basic entitlement unused or fully restored — there is no county loan limit; limits bite only on partially used, unrestored entitlement above US$144,000, where remaining bonus entitlement is 25% of the county one-unit conforming limit less entitlement used and not restored. The funding fee effective 7 April 2023 is 2.15% on a first-use purchase under 5% down, 3.3% on subsequent use, 1.5% at 5% down and 1.25% at 10% down, and 0.5% on an interest rate reduction refinancing loan. It can be financed, and it is the only fee that can be. The VA sets no minimum credit score. Residual income is a real programme rule with published minimums, and the debt-to-income standard is 41% with a regulatory exception for strong residual income. The property must meet Minimum Property Requirements, and you must certify occupancy at application and again at closing.

Who is eligible

Eligibility rests on service, and it is established by your Certificate of Eligibility rather than by anything a lender decides. Broadly it covers veterans meeting the service requirement for their era, active-duty members who have served a qualifying period, National Guard and Reserve members meeting their own thresholds, and certain surviving spouses. Discharge characterisation matters, and the length requirements vary by era and component — the VA's eligibility page is the authority on which band applies to you.

What eligibility does not do is guarantee a loan. The VA guarantees a portion of the lender's risk; it does not lend. You still have to satisfy a lender's underwriting, and that is where programme rules and overlays pull in different directions.

Entitlement, explained properly

Entitlement is the amount the VA will indemnify your lender for if you default. It is not a loan limit and it is not a cap on what you can borrow.

Basic entitlement is US$36,000. That is the figure in 38 U.S.C. §3703, and it is a programme rule. For loans above US$56,250 the guaranty is the lesser of US$36,000 or 40% of the loan — meaning basic entitlement comfortably covers loans up to US$144,000.

Above US$144,000 the guaranty becomes 25% of the loan amount. This is bonus, or second-tier, entitlement, and it is what makes a no-deposit US$500,000 purchase possible. It does not appear on your Certificate of Eligibility, which is why people read their COE, see US$36,000, and conclude they can only borrow that much or must put down the difference. Neither is true.

Full entitlement means basic entitlement unused, or fully restored — restoration happening on sale and payoff, or payoff alone. With full entitlement there is no conforming-limit cap at all; the VA guarantees 25% of whatever the lender will lend.

Without full entitlement, remaining bonus entitlement is 25% of the county one-unit limit published by the Federal Housing Finance Agency, minus entitlement used and not restored. That is a programme rule, and it is the one situation where loan limits still matter.

The truth about VA loan limits

You will read, constantly, that the Blue Water Navy Vietnam Veterans Act "abolished VA loan limits" from 1 January 2020. That simplification misleads the people it most affects.

What the Act did was remove county limits for veterans with full entitlement. If your entitlement is unused or fully restored, there is no limit and the figures below are irrelevant to you.

Limits were not removed for everyone. If you have partially used, unrestored entitlement and you are borrowing above US$144,000, the county limit still determines your remaining guaranty, and therefore how much a lender will advance without a down payment. This happens routinely — a veteran who keeps a first home as a rental and buys a second, or who has a prior VA loan assumed by someone else.

The relevant figures are the FHFA conforming loan limits, programme figures published on 25 November 2025 for 2026.

The 2026 baseline rose by US$26,250, tracking a 3.26% rise in house prices from the third quarter of 2024 to the third quarter of 2025. The ceiling is 150% of the baseline.

The funding fee, and the figures you should not use

The funding fee is what the VA charges in place of mortgage insurance. There is no monthly mortgage insurance on a VA loan at all — the fee is a one-off, and for most borrowers it is the largest single closing figure.

These are the statutory rates, effective 7 April 2023: programme rules, identical at every lender.

Here is the correction that matters. A great many sites still print 2.30% and 3.60% as the no-deposit purchase rates. Those were the Blue Water Navy table, and they applied only to loans closed between 1 January 2020 and 31 December 2021. They expired. Anything written in that window and never revised still carries them, and search results are full of such pages. On a US$450,000 loan, 2.30% is US$10,350 against US$9,675 at the correct 2.15%. If a quote or calculator gives you a fee that will not reconcile against the table above, the number is wrong, not your arithmetic.

Who pays nothing

Exemption is a programme rule and no lender can override it. You are exempt 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 before closing, from a pre-discharge claim
• An active-duty member with evidence of a Purple Heart on or before closing

If you believe you are exempt and the fee appears on your closing disclosure, that is an error to raise immediately, not a negotiation.

Financing the fee

The funding fee can be rolled into the loan, and it is the only fee that can be. Every other cost is paid at closing, from your own funds, a seller concession or a lender credit. Financed, a US$400,000 purchase with no deposit becomes a US$408,600 loan at 2.15% — you pay interest on the fee for the life of the loan, which is the trade for not needing the cash on the day.

Credit, income and the 41% standard

Credit score: no VA rule exists

The VA publishes no minimum credit score. The regulation requires analysis of the credit data, not a threshold, and absence of credit history is explicitly not adverse in itself.

Every floor you encounter is a lender overlay. Some stop at 640, some at 620, some at 580, and some will manually underwrite below that. A score decline is a statement about that lender's appetite and nothing else — which is the strongest argument for shopping a VA loan harder than a conventional one.

Residual income: a genuine programme rule

Residual income is the opposite case. It is published in 38 CFR §36.4340(e), it is unmistakably the VA's own rule — the cash left each month after the mortgage payment, taxes, insurance, maintenance, utilities and every other debt.

These are the minimum monthly figures for loans of US$80,000 and above.

Above five, add US$80 per member, to a family of seven. For loans of US$79,999 and below the figures are lower: one person needs US$390 in the Northeast, US$382 in the Midwest and South and US$425 in the West; a family of four needs US$888, US$868, US$868 and US$967, with US$75 per additional member.

Two details change outcomes. All household members count, including a non-borrowing spouse, unless that spouse's stable employment is verified. And the regulation calls the figures "a guide and not a final determinant" — a lender can approve below them with justification, and will often decline above them for other reasons.

Debt-to-income and the exception people miss

38 CFR §36.4340 states that "the standard is 41 percent or less." That is the programme figure, and it is where almost every article stops.

The regulation does not stop there. A loan above 41% can still be approved, but the lender must justify it in a statement signed by the underwriter's supervisor, and the regulation specifies that the statement "must not be perfunctory."

Then comes the part worth knowing: if residual income exceeds the guideline by at least 20%, that second-level review is not required. That is in the regulation. It is why competent VA lenders write files at 50%, 55% and beyond on borrowers with strong residual income, and why a lender that refuses to look past 41% is applying its own caution, not the VA's standard.

Property and occupancy

Minimum Property Requirements are hooked to 38 CFR §36.4351, with the list in the VA Lender's Handbook, Pamphlet 26-7, Chapter 12. It runs to 44 topics: space and access, drainage, flood and seismic hazards, zoning, utilities, water and sewage, hazards, mechanical systems, roofing, attics, crawl spaces, basements, pools, lead-based paint, radon, nearby airports, manufactured homes and energy conservation. The VA fee appraiser checks them during the appraisal.

MPRs are a programme rule, and they are the reason VA appraisals occasionally kill deals a conventional appraisal would have waved through.

Occupancy is statutory. Under 38 U.S.C. §3704(c)(1) you must certify at application and again at closing an intention to occupy the property as your home. Two certifications, not one. A VA loan is not a vehicle for an investment property, and the certification is the mechanism that says so.

The order this actually happens in

1. Get your Certificate of Eligibility. Online through the VA, through your lender using the Web LGY system, or by post on VA Form 26-1880.
2. Work out your entitlement position. Full, or partially used and unrestored? If the latter, and you are borrowing above US$144,000, the county conforming limit applies to you.
3. Check whether you are exempt from the funding fee. It changes your closing figures materially.
4. Shop at least three lenders. Ask each for its credit score floor, maximum debt-to-income and reserve requirement. You are mapping overlays, not rates.
5. Get pre-approved, with residual income calculated for your actual household size and region.
6. Make an offer, knowing the appraisal will include an MPR check, and deal with any failure as a repair, a renegotiation or a withdrawal.
7. Certify occupancy at closing, and check the funding fee percentage on your closing disclosure against the table above.

Mistakes that cost money

Treating a lender's score floor as a VA rule. It is not one. The VA has no minimum. If a 620 floor stopped your file, another lender's 580 floor may not.

Using the 2.30% or 3.60% funding fee figures. They expired on 31 December 2021. The current no-deposit rates are 2.15% first use and 3.3% subsequent use.

Paying the funding fee when you are exempt. Compensation for a service-connected disability, eligibility for it while drawing retirement or active-duty pay, Dependency and Indemnity Compensation, a pre-discharge proposed or memorandum rating, or a Purple Heart all exempt you.

Assuming you can only borrow US$36,000, or must cover the gap in cash. Basic entitlement is US$36,000, but above US$144,000 the guaranty becomes 25% of the loan amount and US$36,000 stops being the operative number.

Believing loan limits were abolished outright. With full entitlement there is no limit. With partially used, unrestored entitlement above US$144,000, the county one-unit limit still sets your remaining guaranty.

Giving up at 41% debt-to-income. 41% is the standard, not the ceiling. Residual income exceeding the guideline by 20% removes the supervisory review requirement entirely.

Forgetting a non-borrowing spouse in the residual income count. All household members count unless that spouse's stable employment is verified.

Trying to finance anything other than the funding fee. Only the fee can be rolled in. Everything else is a closing-day cost, covered by you, the seller or a lender credit.

Edge cases and alternatives

Subsequent use with 5% down. The 3.3% subsequent-use penalty applies only below 5% down. Find 5% and the fee falls to 1.5%, the same as a first-time user — on a US$400,000 loan that is US$13,200 down to US$6,000. It is the most under-used lever in the programme.

Restoring entitlement. Entitlement is restored on sale or payoff. If an unrestored prior loan is constraining a new purchase, selling or paying off the old property resets you to full entitlement and removes the county limit from the calculation.

Loans under US$80,000. The residual income minimums are a separate, lower set. If you are buying in a low-cost market, the US$80,000-and-above table is not yours.

When another programme is better. With a large deposit and a strong score, a conventional loan may cost less overall, because private mortgage insurance cancels at 80% loan-to-value. And if a property cannot meet MPRs and the seller will not repair, FHA or conventional may be the only way to buy that particular house.

Disclaimer

This guide explains Department of Veterans Affairs home loan programme rules as published in 38 U.S.C. §§3703 and 3704, 38 CFR §§36.4340 and 36.4351 and the VA Lender's Handbook, with Federal Housing Finance Agency conforming limits. Figures were checked on 12 October 2026. It is information, not mortgage or legal advice, and it cannot tell you what any individual lender will approve, because overlays are commercial policy and change without notice. Confirm your entitlement position against your Certificate of Eligibility and the VA directly.

The short version

Learn which numbers are the VA's and which are a lender's, because the difference decides what you do when you hear no. The funding fee percentages, the US$36,000 basic entitlement, the 25% guaranty above US$144,000, the residual income table, the 41% standard with its 20% residual income exception, Minimum Property Requirements and the two occupancy certifications are all programme rules, identical at every lender in the country.

Credit score floors, maximum debt-to-income beyond the regulation, reserve requirements and property-type restrictions are not. They are overlays, they vary widely, and they are the usual reason a VA file fails. A decline on any of those grounds is one lender's answer, not the programme's.

Before you sign, do three checks. Confirm the funding fee against the table above, because the expired 2.30% and 3.60% figures are still in circulation. Confirm whether you are exempt from it altogether. And confirm your entitlement is full — or, if it is not, work out your remaining bonus entitlement as 25% of the county one-unit limit less what you have used. That is the single case where VA loan limits still bite, and it is the case most guides tell you no longer exists.