Nathan Strodtbeck, REALTOR®

VA Loans 101

Understanding your VA loan benefit.

The essentials of VA home loans: eligibility, the funding fee, residual income, and what changes in West Michigan.

Eligibility

Who qualifies?

VA home loans are available to:

  • · Veterans with qualifying active-duty service (generally 90 days wartime or 181 days peacetime)
  • · Active-duty service members currently serving
  • · National Guard and Reserve members with at least six years of service, or who were activated under federal orders
  • · Surviving spouses of veterans who died in the line of duty or from a service-connected disability

Eligibility is verified through the Certificate of Eligibility (COE), which a VA-approved lender can typically obtain electronically in minutes.

Key Advantages

What makes a VA loan different.

No Down Payment Required

VA loans allow eligible borrowers to purchase a home with no money down. This is not a temporary program or a special credit; it is a standard feature of VA-backed lending. In a West Michigan market where homes sell quickly, preserving cash for other costs can meaningfully improve your position.

No Private Mortgage Insurance

Conventional loans with less than 20% down require PMI, an ongoing monthly cost. VA loans carry no PMI requirement at any down payment level. Over the life of a loan, this difference amounts to tens of thousands of dollars.

Competitive Interest Rates

Because VA loans are backed by the federal government, lenders take on less risk. That translates to interest rates that are typically lower than conventional equivalents for the same borrower profile.

Limitations on Closing Costs

The VA limits what lenders can charge VA borrowers in closing costs. Certain fees, including some real estate commissions and brokerage fees, cannot legally be charged to the buyer under VA rules.

Funding Fee

The funding fee, and when it's waived.

The VA funding fee is a one-time payment that helps sustain the VA loan program for future generations of service members. It is typically rolled into the loan rather than paid upfront.

The fee percentage depends on:

  • · Whether it is your first VA loan or a subsequent use
  • · Your down payment amount
  • · Your military service category (Regular Military vs. Reserves/Guard)

Residual Income

The test most calculators miss.

VA loans use two qualification tests. Most people know the debt-to-income ratio (DTI) limit of 41%. Fewer know about the residual income requirement.

Residual income is the money left over each month after all recurring debt payments. Not as a percentage of income, but as an absolute dollar amount. The VA publishes regional thresholds by family size. For Michigan, the Midwest table applies.

If your DTI-derived maximum purchase price doesn't leave enough residual income, the loan won't qualify at that amount, even if you are technically under 41% DTI. The binding constraint is whichever limit is more restrictive.

The VA Affordability Calculator handles both limits simultaneously, iterating to find the highest home price where both tests pass.

Run the Dual-Limit Calculator

Common Questions

Frequently asked.

Who is eligible for a VA home loan?
VA home loans are available to veterans, active-duty service members, National Guard and Reserve members (with qualifying service), and surviving spouses of veterans who died in service or from a service-connected disability. Specific service requirements vary by era. The VA's Certificate of Eligibility (COE) process verifies eligibility.
What is the VA funding fee and who is exempt?
The VA funding fee is a one-time fee paid to the VA to sustain the loan program. The amount depends on your down payment and whether it's your first VA loan. Veterans receiving VA disability compensation are exempt from the funding fee entirely. This exemption is automatic and must be noted in the loan file.
What is the VA residual income test?
After all monthly debt payments, a VA loan applicant must have a minimum amount of income remaining. This is the residual income requirement. For Michigan (Midwest region), the thresholds vary by family size and loan amount. The residual income test is separate from the DTI limit and can be the binding constraint for some buyers.
Do VA loans require a down payment?
No. VA loans do not require a down payment for eligible borrowers purchasing a home at or below the conforming loan limit. There is also no private mortgage insurance (PMI) requirement, regardless of down payment amount.
Can I use a VA loan to buy a home in Grand Rapids, Michigan?
Yes. VA loans are available nationwide for primary residences, including Grand Rapids and all of West Michigan. Loan limits, residual income tables, and BAH rates are specific to the area.

Free Download

The VA Homebuyer's Guide
for West Michigan.

A plain-language PDF covering everything on this page, plus Michigan-specific details, what to expect in the Grand Rapids market, and questions to ask your lender.

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