The VA loan program, run by the Department of Veterans Affairs, guarantees a portion of home loans for eligible service members, veterans, and surviving spouses. The government guarantee lets private lenders extend zero-down financing at rates competitive with or below conventional. For the 240,000+ veterans in San Diego County, it's a benefit most would be foolish to ignore.
The Thesis in One Sentence
If you qualify for a VA loan, no other loan product comes close for most San Diego home purchases. The exceptions are narrow and specific.
That's a strong claim, but the math supports it. Zero down payment. No mortgage insurance, ever. Rates typically 0.25-0.50 points below conventional. No prepayment penalties. An assumable loan that retains value in rising-rate environments. Limited closing costs. The VA loan is a genuine veteran benefit, not a consolation prize.
2020 Limit Change: It Matters
Since January 2020, veterans with full entitlement have no loan limit. You can use a VA loan for a $1.5M, $2M, or larger San Diego purchase with zero down, as long as you qualify on income. Before 2020, VA jumbo required a 25% down payment above the conforming limit. That restriction is gone for most users.
Who Qualifies
VA eligibility is determined by the VA, not the lender. You'll need a Certificate of Eligibility (COE), which a lender can pull in minutes. Eligibility generally requires:
- Active duty: 90 continuous days during wartime, or 181 days during peacetime
- National Guard / Reserves: 6 years of service, or 90 days of active-duty service (activated under Title 10)
- Veterans: Service requirements vary by era; most post-9/11 veterans qualify after 90+ days of active duty
- Surviving spouses: Eligible if the veteran died in service or from a service-connected disability (some exceptions)
Your lender can confirm eligibility before you shop. If you're borderline, apply — the VA will make the final determination.
Why VA Beats Everything Else
On an $800K San Diego home with 0% VA down vs 5% conventional vs 3.5% FHA:
| Metric | VA Loan | Conventional 95% | FHA 96.5% |
|---|---|---|---|
| Down Payment | $0 | $40,000 | $28,000 |
| Loan Amount | $818,000 (funding fee) | $760,000 | $785,000 (UFMIP) |
| Illustrative Rate | ~6.25% | ~6.875% | ~6.50% |
| Monthly P&I | $5,034 | $4,992 | $4,961 |
| Mortgage Insurance | $0 (none, ever) | $507/mo (until 80% LTV) | $360/mo (life of loan) |
| Total Monthly | $5,034 | $5,499 | $5,321 |
| Cash Required at Closing | $10K-$15K | $50K-$55K | $35K-$40K |
Zero down, lowest monthly payment, and no mortgage insurance. The VA loan isn't just competitive — it's the best product on the table for eligible buyers.
The VA Funding Fee
The one cost VA doesn't waive is the funding fee, which replaces mortgage insurance. It's a one-time fee paid at closing, typically financed into the loan.
| Scenario | First Use | Subsequent Use |
|---|---|---|
| 0% down | 2.15% | 3.30% |
| 5% down | 1.50% | 1.50% |
| 10%+ down | 1.25% | 1.25% |
Who's Exempt from the Funding Fee
- Veterans receiving VA disability compensation
- Surviving spouses of service members who died in service
- Purple Heart recipients (active duty)
- Active-duty service members who received a Purple Heart
Even without an exemption, the funding fee on a zero-down loan (2.15%) is far cheaper than paying mortgage insurance for years.
What VA Doesn't Limit
No Down Payment Required
100% financing. You can put money down if you want (and reduce the funding fee), but the VA doesn't require it.
No Mortgage Insurance
Not optional removal. Not removable at 80% LTV. Simply none, ever. The funding fee replaces it entirely.
No Prepayment Penalty
Pay off whenever you want. Accelerate, refinance, or sell — no penalties.
Competitive Rates
Because the VA guarantees 25% of the loan, lenders charge less for risk. VA rates typically run 0.25-0.50 points below conventional.
Assumability
Like FHA, VA loans are assumable by qualified buyers (VA-eligible or civilian). If rates rise, your low-rate VA loan becomes a selling point.
What VA Does Require
Primary Residence Only
VA loans must be for a property you'll occupy as your primary residence within 60 days of closing. No investment properties or second homes.
VA Appraisal
Similar to FHA, VA uses a specific appraisal that checks safety, sanitation, and structural soundness. In San Diego's older housing stock, this can occasionally trigger repair requirements.
Residual Income Requirement
VA uses residual income — the money left after all major expenses — in addition to DTI. In San Diego's high-cost region, the residual income floor for a family of four is around $1,100-$1,300/month.
One-Time Use... Mostly
You can only have one VA loan outstanding at a time in most cases. Once your VA loan is paid off (by sale or refinance), your full entitlement restores.
The San Diego Advantage
San Diego has the highest VA loan origination volume of any metro in the United States. In 2025, more than 14,500 VA loans closed in the county — roughly 22% of all purchase originations.
VA Home Loan Benefits Report, FY 2025
- Dense veteran population: San Diego is home to 240,000+ veterans and 110,000+ active-duty service members
- Lender expertise: Local lenders process VA volume daily and often beat national lenders on pricing and timeline
- No limit works here: The no-limit VA policy is especially valuable in a $1M+ median-price market
- Realtor familiarity: Most agents know how to structure offers to compete despite VA's extra appraisal step
When VA Isn't the Right Choice
Narrow exceptions, but real:
- You're buying an investment property. VA is primary-residence only.
- You're buying a condo in a non-VA-approved project. VA's condo approval list is larger than FHA's, but still excludes many San Diego downtown buildings.
- You expect to move within 2-3 years. Funding fee is a real one-time cost that amortizes poorly over short holds. Consider a 5/1 ARM instead.
- The property won't pass VA appraisal. Fixer-uppers or properties with known safety issues may need conventional financing instead.
- You're competing in a hot multi-offer situation with VA sensitivity. Rare in San Diego now (realtors are used to VA), but possible. Work with an experienced VA agent.
VA Specialty Products
VA Streamline Refinance (IRRRL)
If rates drop and you already have a VA loan, the Interest Rate Reduction Refinance Loan (IRRRL) lets you refinance with minimal documentation — no appraisal, no income re-verification, no credit re-check. It's the fastest, cheapest refi in American lending.
VA Cash-Out Refinance
Unlike most cash-out products, VA allows up to 100% LTV cash-out in most cases. That means you can pull out equity up to the full home value — not the 80% cap most conventional and FHA products impose.
VA Energy-Efficient Mortgage
Lets you finance up to $6,000 in energy-efficient improvements into your VA loan. Underutilized in San Diego, but meaningful for older-home buyers.
Common Mistakes
- Putting money down because "you're supposed to." Unless you have a specific reason (lower funding fee, better rate tier, or larger equity cushion), 0% down is fine and often optimal.
- Not getting your COE early. Knowing your eligibility before shopping saves time and strengthens your offer.
- Using a non-VA-specialist lender. VA loans have quirks. A lender that closes 5 VA loans a year will miss things a lender that closes 50 won't.
- Assuming the funding fee is a "tax." It replaces mortgage insurance and is financed into the loan. Over the life of the loan it's a small fraction of what PMI would cost.
- Forgetting about IRRRL. If rates drop after you close, refinance. It costs almost nothing.
The Bottom Line
For San Diego veterans and active-duty service members, the VA loan is the best mortgage product available for the vast majority of purchases. Zero down, no mortgage insurance, competitive rates, and unique benefits like IRRRL and assumability.
The narrow exceptions — investment properties, certain condos, very short holds — matter, but they're exceptions. For 95% of eligible buyers, the VA loan is strictly better than FHA, conventional, and jumbo alternatives.
If you're eligible, get your COE, shop two or three VA-specialist lenders, and buy. It's one of the most valuable earned benefits in American public policy, and San Diego is the best place in the country to use it.