Illinois VA Mortgage
Eligible veterans and active-duty service members can buy a home in Illinois with no down payment and no monthly mortgage insurance. For borrowers with full VA entitlement, there is also no VA-imposed loan limit; the purchase price is governed by the lender’s underwriting, not a dollar ceiling set by the county. The VA funding fee for a first-time purchase with no money down is 2.15% of the loan amount in 2026 and can be financed into the loan rather than paid at closing. Veterans receiving VA disability compensation are exempt from the funding fee entirely.
Illinois is home to three major military installations and a state-level property tax exemption that eliminates the property tax bill for veterans with a 70% or greater service-connected disability rating. Combined with the federal VA loan benefit, these programs represent a substantial financial advantage for eligible borrowers.
Apply for the Illinois VA Program →
VA vs. FHA vs. Conventional: Quick Comparison
For eligible Illinois veterans and service members, VA (Department of Veterans Affairs) produces the lowest monthly cost of any standard mortgage program in almost every scenario.
| Feature | VA | FHA | Conventional |
|---|---|---|---|
| Down payment | 0% | 3.5% (580+ score) | 3–5% |
| Monthly mortgage insurance | None | MIP, life of loan (<10% down) | PMI, cancels at 20% |
| Funding fee | 2.15% first use (0% down) | 1.75% upfront MIP | None |
| Credit score (program min.) | None set | 580 | 620 |
| 2026 loan limit | None (full VA entitlement) | $541,287 most counties | $832,750 |
| Seller concessions | Up to 4% + normal closing costs | Up to 6% | 3–6% by LTV |
Why Illinois Veterans Use VA Loans: VA Loan Benefits
The VA loan eliminates the two costs that price most buyers out of early homeownership: the down payment and monthly mortgage insurance. On a $350,000 home, a conventional borrower putting 3% down brings $10,500 to the table and pays PMI until they reach 20% equity. A VA borrower brings nothing and pays no PMI, ever.
That federal advantage compounds in Illinois in ways it does not in most other states. A veteran with a 70% or greater service-connected disability rating pays no property taxes on the home they buy with that VA loan. A retired military borrower in Illinois pays no state income tax on their pension, freeing up income that goes directly toward qualifying and carrying the mortgage. And with no VA loan limit for full-entitlement borrowers, veterans buying in the Chicago metro area or its higher-priced suburbs have access to the full VA benefit on purchases that would push conventional borrowers into jumbo territory.
The combination of no down payment, no mortgage insurance, no loan limit, no property tax (for qualifying disabled veterans), and no state tax on military retirement income makes Illinois one of the stronger states in the country for veteran homeownership from a total cost-of-ownership standpoint.
Illinois Military Installations
Illinois has one of the largest veteran populations in the Midwest, and the communities surrounding the state’s major military installations rely heavily on VA financing.
Scott Air Force Base in Belleville (St. Clair County, Metro East region) is home to US Transportation Command and Air Mobility Command, two of the largest unified commands in the US military. The base directly employs tens of thousands of military and civilian personnel. The surrounding communities in the Metro East area, Belleville, O’Fallon, Shiloh, Fairview Heights, and Swansea, have a consistently high VA loan market.
Rock Island Arsenal on the Quad Cities border of Illinois and Iowa is one of the oldest active US Army installations and a major manufacturing and logistics facility. Veterans and active-duty personnel in the Quad Cities metro frequently use VA financing in both the Illinois and Iowa communities surrounding the installation.
Naval Station Great Lakes in North Chicago is the Navy’s only boot camp, training approximately 17,000 recruits annually and employing tens of thousands of active-duty sailors and civilians in the communities along the northern Illinois lakefront. Communities including Waukegan, North Chicago, Gurnee, and Grayslake have significant VA loan volume tied to this installation.
Illinois National Guard installations across the state also contribute to a broad veteran population. Chicago itself has a large and diverse veteran community spanning every branch of service.
Illinois State Veteran Benefits: Grants, Property Tax Exemption, and More
In addition to the federal VA program, Illinois administers state-level programs that provide additional support to veterans and their families.
Illinois Veterans’ Property Tax Exemption: Veterans with a VA disability rating may qualify for a significant property tax exemption on their primary residence. The exemption can be up to $100,000 off the assessed value for veterans with a 70%+ disability rating, with scaled amounts for lower ratings. Veterans who are 100% permanently disabled may receive a complete property tax exemption. Contact the Illinois Department of Veterans’ Affairs (IDVA) at idva.illinois.gov or your county assessor for current qualification details.
IDVA Assistance: The Illinois Department of Veterans’ Affairs provides direct assistance to veterans navigating federal and state benefits, including VA loan COE assistance, disability claims, and referrals to veterans service organizations. IDVA offices are located across Illinois. Visit idva.illinois.gov for the nearest office.
Illinois Fallen Heroes Grant and other survivor programs: Illinois administers several programs supporting surviving family members of veterans who died in service. IDVA is the primary point of contact for these programs.
These state benefits are separate from and in addition to the federal VA program benefit. A property tax exemption significant enough to eliminate or drastically reduce the annual tax bill can substantially affect the long-term affordability of homeownership for eligible disabled veterans.
VA Home Loan Eligibility: Who Qualifies for a VA Loan in Illinois
VA program eligibility is based on military service history, discharge type, and minimum service duration. Illinois residents in the following categories should verify eligibility through the Certificate of Eligibility process.
Veterans
- Wartime service: 90 or more days of active duty during a declared war with honorable discharge
- Peacetime service: 181 or more consecutive days of active duty with honorable discharge
- Post-September 7, 1980 enlistments: 24 months of continuous active duty required
Veterans with other-than-honorable discharges are evaluated on a case-by-case basis by the VA. Dishonorable discharges disqualify a veteran from VA program benefits.
Active-Duty Service Members
Currently serving members who have completed 90 or more consecutive days of active service are eligible.
National Guard and Reserve Members
Illinois National Guard members and Reservists who have completed 6 years of qualifying honorable service in the Selected Reserve, or who have been activated on federal orders for 90 or more days under Title 10 authority, are eligible.
Surviving Spouses
Unremarried surviving spouses of veterans who died in service or from a service-connected disability are eligible. Surviving spouses of veterans who are totally disabled from a service-connected condition and died from any cause may also qualify with specific length-of-disability requirements.
See complete VA eligibility documentation →
Certificate of Eligibility (COE)
The Certificate of Eligibility confirms that a borrower meets the VA’s service requirements and shows the entitlement amount available. For most Illinois borrowers, the fastest path is through a VA-approved lender; most can retrieve the COE electronically within minutes through the VA’s Automated Certificate of Eligibility system during pre-approval. No separate VA paperwork is typically required.
Separated veterans can also request the COE directly using VA Form 26-1880 with their DD-214 through the VA’s eBenefits portal.
2026 VA Funding Fee
The VA funding fee replaces the monthly private mortgage insurance that FHA and conventional loans require. It is a one-time charge that can be financed into the loan.
Purchase Loan Funding Fees:
| Down Payment | First Use | Subsequent Use |
|---|---|---|
| Less than 5% | 2.15% | 3.30% |
| 5% to 9.99% | 1.50% | 1.50% |
| 10% or more | 1.25% | 1.25% |
Refinance Funding Fees:
| Loan Type | Fee |
|---|---|
| VA IRRRL (Streamline) | 0.50% |
| VA Cash-Out (First Use) | 2.15% |
| VA Cash-Out (Subsequent Use) | 3.30% |
Funding Fee Exemption
Veterans receiving VA disability compensation for a service-connected condition pay no funding fee. Purple Heart recipients on active duty are also exempt. This exemption is one of the most significant financial benefits available to disabled Illinois veterans and applies to every VA loan transaction, not just the first use.
On a $350,000 Illinois purchase, the 2.15% first-use fee is $7,525. For a disabled veteran, that $7,525 is completely waived.
If a disability claim is pending at closing, the funding fee must be paid but may be refunded retroactively once the VA approves the claim. Veterans in this situation should notify their lender before closing and keep documentation of the claim.
See complete VA funding fee guide →
No Loan Limit for Illinois Veterans With Full Entitlement
The Blue Water Navy Vietnam Veterans Act, signed in August 2019 and effective January 1, 2020, eliminated VA loan limits for veterans with full entitlement. There is no county-level cap, no state-specific ceiling, and no maximum purchase price for eligible Illinois borrowers with full entitlement.
This matters particularly in the Chicago metro area and northern Illinois suburbs where home prices regularly exceed the FHA baseline limit of $541,287 and sometimes the conventional conforming limit of $832,750. An eligible veteran purchasing in Evanston, Naperville, Lake Forest, or the North Shore communities can use VA financing without a loan limit, while a non-veteran buyer above the conforming limit would need jumbo financing.
Veterans with partial entitlement (due to an active VA loan or prior VA loan loss) may be subject to county limits for zero-down-payment calculation purposes. A VA-approved lender can calculate available entitlement from the COE.
Credit Requirements
The VA program sets no minimum credit score. Individual lenders apply their own minimums (overlays), typically 580 to 640. Some VA-experienced Illinois lenders work below 580 through manual underwriting with compensating factors. The most recent 12 months of loan payment history is weighted most heavily in VA credit evaluation.
See our mortgage overlays guide →
Debt-to-Income Ratio and Residual Income
VA uses two qualification standards: the back-end DTI ratio (guideline of 41%) and the residual income test, which measures actual monthly cash remaining after all debt obligations are paid.
Residual income is the standard that has given VA loans the lowest default rate of any major mortgage program. Files with DTI above 41% can still be approved when residual income is at least 20% above VA’s minimum for the household size and geographic region.
Illinois falls in the Midwest region for VA residual income calculations. For a family of four with a loan above $80,000, the minimum residual income is $1,003/month. Meeting this threshold is what makes the VA program’s flexible DTI possible without elevated default risk.
See complete VA residual income tables →
Eligible Property Types in Illinois
VA financing covers primary residences only. Eligible property types include single-family detached homes, VA-approved condominiums, townhomes, 2-4 unit properties when the borrower occupies one unit, and manufactured homes on permanent foundations with specific restrictions.
Multi-Unit Properties
VA allows purchase of 2-, 3-, or 4-unit properties with zero down payment when the borrower occupies one unit as their primary residence. This is particularly relevant in Chicago and its established neighborhoods where two-flats and three-flats are abundant. Rental income from the other units can help with qualification.
Condominiums
The condo development must be on the VA’s approved list. VA does not offer spot approvals for individual units in unapproved developments. Verify VA approval status at lgy.va.gov/lgyhub/condo-report before pursuing a specific Illinois condo with VA financing.
Not eligible: Investment properties, vacation homes, and commercial properties.
VA Minimum Property Requirements
Every VA purchase includes a VA appraisal evaluating both market value and property condition against VA Minimum Property Requirements. The appraisal is not a home inspection; always commission a private home inspection in addition.
Illinois’s older housing stock, particularly in Chicago, established suburbs, and smaller downstate cities, can trigger VA MPR conditions related to lead paint on pre-1978 homes, older electrical systems, and deferred maintenance. A pre-offer inspection helps identify likely conditions before going under contract.
Seller Concessions
VA allows sellers to contribute up to 4% of the established home value in concessions toward the buyer’s costs, in addition to normal closing costs. Combined with a motivated seller, this can cover the VA funding fee and most or all closing costs, allowing an eligible Illinois veteran to purchase a home with zero out-of-pocket expense.
Documenting Income for the Illinois VA Program
VA lenders verify income using standard mortgage documentation. The goal is to demonstrate stable, ongoing income sufficient to support the monthly mortgage payment and meet VA residual income requirements.
Most borrowers qualify on employment income, but VA guidelines recognize a wide range of income sources, including military allowances, disability payments, and retirement income, and often allow favorable treatment of non-taxable income that conventional underwriting does not.
The checklist below covers the documentation each income type requires.
W-2 employees:
- Pay stubs covering the most recent 30 days
- W-2 forms for the past 2 years
- Federal tax returns for the past 2 years
- Verbal employment verification within 10 business days of closing
Self-employed borrowers (25%+ business ownership):
- Personal and business federal tax returns, 2 years, all schedules
- Year-to-date profit and loss statement
- Proof the business is currently operating within 30 days of closing
Disability income, VA compensation, retirement pay, investment income: Bank statements for 24 months showing receipt, award letters, and personal tax returns.
VA Refinance Options for Illinois Veterans
Illinois veterans with an existing VA loan, or veterans currently carrying a conventional or FHA mortgage who have not yet used their VA benefit, have access to two distinct VA refinance programs.
The IRRRL is the faster, lower-cost path for borrowers who want a lower rate on an existing VA loan.
The cash-out refinance is the tool for accessing equity, eliminating mortgage insurance, or converting a non-VA loan into a VA loan.
Each program has its own fee structure, documentation requirements, and use case.
VA IRRRL (VA Interest Rate Reduction Refinance)
The VA IRRRL is the most efficient refinance loan available to existing VA loan holders. A credit report with scores is required, but income documentation and an appraisal are typically not required. Must result in a lower interest rate (exception for ARM-to-fixed conversions), and the existing home loan must be a VA-backed mortgage. Funding fee: 0.50%.
VA Cash-Out Refinance
Allows refinancing any existing mortgage (VA or non-VA) into a new VA loan and accessing equity in cash. Full income documentation and appraisal required. Available to Illinois veterans who purchased with conventional or FHA financing at their original purchase. Funding fee applies at the purchase loan rates.
See VA Cash-Out Refinance details →
VA Second-Tier Entitlement in Illinois
Second-tier VA loan entitlement allows a veteran to hold two active VA loans simultaneously in specific circumstances, most commonly when military orders require purchasing a new primary residence without selling the current VA-financed home.
Illinois National Guard members and active-duty personnel at Illinois installations who receive orders to a new duty station may retain their current Illinois home and purchase a new one at the destination using remaining entitlement.
Use our VA Second-Tier Entitlement Calculator to determine available entitlement for a second purchase based on the remaining balance on an existing VA loan.
See VA Second-Tier Entitlement Calculator →
Types of Loan Rates Available in Illinois
The VA loan program does not restrict borrowers to a single repayment structure. Illinois veterans can choose from fixed-rate and adjustable-rate options depending on how long they plan to stay in the home and how they want to manage interest rate risk. Fixed-rate loans provide certainty for buyers who prioritize a predictable payment. Adjustable-rate options offer a lower initial rate that may suit active-duty borrowers with shorter expected occupancy timelines.
VA loans are available as 30-year fixed, 15-year fixed, and adjustable-rate mortgages. Fixed-rate loans lock the interest rate and principal and interest payment for the life of the loan. VA hybrid ARMs offer an initial fixed period followed by annual adjustments capped at 1% per year with a 5% lifetime cap (for fixed periods under five years). Most VA borrowers choose the 30-year fixed for the lowest monthly payment and long-term predictability.
30-year fixed rate: The most common choice. A stable monthly payment for the life of the loan. Appropriate for veterans who plan to stay in the home long-term.
15-year fixed rate: Higher monthly payment than the 30-year but lower interest rate and significantly faster equity accumulation.
Adjustable-rate mortgage (ARM): Available in 5/1, 7/1, and 10/1 structures, fixed for the initial period, then adjusting annually. Suitable for veterans who are confident they will sell or refinance before the fixed period ends.
Frequently Asked Questions About the Illinois VA Program
The questions below address what Illinois veterans most commonly ask before applying for a VA home loan, from eligibility and the Chicago housing market to disability exemptions and what to expect at closing.
Who qualifies for the VA program in Illinois?
Veterans with qualifying service and an honorable or general discharge, active-duty members who have completed 90 days of continuous service, Illinois National Guard and Reserve members with 6 years of qualifying service or Title 10 activation for 90+ days, and unremarried surviving spouses of veterans who died in service or from service-connected disabilities.
Is there a VA loan limit in Illinois for 2026?
No loan limit applies to veterans with full entitlement. Since January 1, 2020, Illinois veterans with full entitlement can finance any amount their income supports with no down payment. Partial entitlement borrowers may be subject to county limits. This is particularly meaningful in the Chicago metro and northern suburbs where home prices exceed the standard FHA and conventional conforming limits.
Does the VA program work for a condo in Chicago?
Yes, if the development is on the VA’s approved condo list. VA does not offer spot approvals for individual units in unapproved projects, unlike FHA, which has a Single Unit Approval path. Check any specific Chicago condo development at lgy.va.gov/lgyhub/condo-report before making an offer.
Can I buy a multi-unit property in Chicago with the VA program?
Yes. VA allows purchase of 2-4 unit properties with zero down when you occupy one unit as your primary residence. Chicago’s abundance of two-flats and three-flats makes this one of the most practical VA features in the Illinois market. Rental income from the other units can help qualify.
What is the VA funding fee for Illinois veterans in 2026?
First-time use with no down payment: 2.15%. Subsequent use with no down payment: 3.30%. Putting 5% down reduces both to 1.50% and eliminates the subsequent-use penalty. Veterans receiving VA disability compensation pay no funding fee.
Does Illinois offer any state-level benefits for VA loan holders?
The VA program itself is a federal program. Illinois separately offers a property tax exemption of up to $100,000 off assessed value for veterans with disability ratings, with a complete exemption available for 100% permanently disabled veterans. This state benefit is administered through IDVA and county assessors, not the mortgage lender.
Can I get a VA loan after bankruptcy in Illinois?
Yes. Chapter 7 bankruptcy requires a 2-year waiting period from the discharge date with re-established credit. Chapter 13 allows applying after 12 months of on-time trustee payments with court approval, without waiting for full discharge.
See VA loan after bankruptcy guide →
How long does an Illinois VA loan take to close?
Typically 30-45 days from completed application. VA appraisals and any required repair conditions are the most common source of timeline variance. Responding promptly to every lender or loan officer document request is the most effective way to stay on schedule.
What is the 4% rule for VA loans?
The 4% rule refers to the VA’s seller concession limit. VA guidelines allow a seller to contribute up to 4% of the property’s reasonable value in concessions to the buyer. Concessions within that cap can include prepaid property taxes and homeowner’s insurance, the buyer’s VA funding fee, payoff of the buyer’s outstanding debts or judgments, and gifts. Seller-paid normal closing costs, things like title fees, the VA appraisal, and discount points, fall outside the 4% cap and are treated separately.
This distinction matters in negotiations: a seller willing to contribute toward both closing costs and concessions can technically cover more than 4% of the purchase price in total seller-paid costs when the categories are properly separated.
How much is the monthly payment on a $300,000 VA loan?
At a rate of 7.750%, a $300,000 VA purchase with no money down results in a loan amount of approximately $306,450 after the 2.15% first-use funding fee is financed in. The principal and interest payment on that balance over 30 years is approximately $2,196 per month.
Property taxes, homeowner’s insurance, and any HOA dues are added on top of that figure. Veterans exempt from the funding fee would borrow exactly $300,000, bringing the principal and interest payment down to approximately $2,149 per month at the same rate. Actual rates and payments vary based on credit, down payment, and market conditions at the time of application.
What can disqualify you from getting a VA loan?
The most common disqualifying factors fall into three categories: service history, financial history, and property condition. On the service side, a discharge under conditions other than dishonorable is required; a dishonorable discharge eliminates eligibility.
On the financial side, a lender overlay credit score minimum that the borrower does not meet, a debt-to-income ratio too high to offset with residual income, insufficient residual income for the household size, unresolved VA loan losses from a prior foreclosure (which reduces available entitlement), or a recent bankruptcy within the required seasoning period can each stop an approval.
On the property side, a home that does not meet VA Minimum Property Requirements, structural issues, safety hazards, or inadequate mechanical systems flagged during the appraisal must be remediated before closing, or the loan cannot proceed. None of these are necessarily permanent. Credit can be rebuilt, entitlement can be restored, bankruptcies age out of required waiting periods, and sellers can address MPR items before closing.
Illinois veterans have earned one of the strongest home financing benefits available
No down payment, no mortgage insurance, and a state that eliminates the property tax bill for veterans with significant service-connected disabilities make Illinois a favorable state to buy a home after service. Whether you are buying near Scott AFB, Great Lakes, the Rock Island Arsenal, or anywhere else across the state, the process starts with a pre-approval.
The application takes minutes, and a VA-approved lender can retrieve your Certificate of Eligibility electronically. Most eligible veterans are closer to closing than they expect.
Ready to Apply for an Illinois VA Loan?
Apply online or call 262-305-0680 to speak with a VA-approved Illinois lender today. We serve veterans throughout Illinois including Chicago, Rockford, Peoria, Springfield, Champaign, Quad Cities, Joliet, Aurora, Naperville, the Metro East region near Scott AFB, the North Shore communities near Great Lakes Naval Station, and communities statewide.
VA Loan Example (0% down): $300,000 sales price, $0 down payment, $306,450 loan amount (includes $6,450 first-time use VA Funding Fee), 7.750% interest rate, 7.87% APR, $2,196 principal and interest payment.
VA Loan Example (5% down): $300,000 sales price, $15,000 down payment, $289,275 loan amount (includes $4,275 first-time use VA Funding Fee), 7.750% interest rate, 7.90% APR, $2,074 principal and interest payment.
Taxes, insurance, and mortgage insurance will be part of the total monthly mortgage payment but are not included in the above examples. These examples are for illustrative purposes only and may differ from the current interest rate offered. Call for the current rate and full disclosure of current terms.
Union Home Mortgage Corp. does not provide tax, legal, credit repair, or accounting services.
This information is provided for educational purposes only. VA loan guidelines, funding fee rates, and eligibility requirements are subject to change. Illinois state veteran benefit programs are administered by the Illinois Department of Veterans’ Affairs, county assessors, and other state agencies and are subject to change independently of the federal VA loan program. Verify current details with a licensed mortgage professional and your county assessor.
