VA Mortgages
A VA loan is a mortgage loan program designed specifically for eligible veterans, active duty service members, certain members of the National Guard and Reserves, and some surviving spouses of veterans. VA loans are guaranteed by the U.S. Department of Veterans Affairs (VA), which allows qualified borrowers to obtain favorable terms and conditions for home loans.
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Here are the key features of VA loans:
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No Down Payment: One of the most significant benefits of a VA loan is that eligible borrowers can finance up to 100% of the home's purchase price without requiring a down payment. This feature makes homeownership more accessible to veterans and service members who may not have substantial savings for a down payment.
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No Private Mortgage Insurance (PMI): VA loans do not require borrowers to pay private mortgage insurance (PMI), even with no down payment. This can result in lower monthly payments compared to conventional and FHA loans, which typically require PMI if the down payment is less than 20%.
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Competitive Interest Rates: VA loans often have competitive interest rates compared to conventional loans, which can save borrowers money over the life of the loan.
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Flexible Credit Requirements: While VA loans do have credit score requirements, they may be more flexible compared to conventional loans. The VA does not set a minimum credit score requirement, but lenders may have their own standards.
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Funding Fee: VA loans typically require a one-time funding fee paid at closing, which helps offset the cost of the program to taxpayers. The amount of the funding fee can vary based on factors such as the borrower's military service, down payment amount (if any), and whether it's the borrower's first VA loan or subsequent use.
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Assumption of Loan: VA loans are assumable, meaning that if the borrower sells the home, the buyer may be able to take over the VA loan under certain conditions. This feature can be advantageous in a rising interest rate environment.
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Limits on Closing Costs: The VA limits the types of closing costs that veterans are allowed to pay, which can help reduce the upfront costs associated with obtaining a mortgage.
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To qualify for a VA loan, borrowers must meet certain eligibility requirements based on their military service, discharge status, and other criteria set by the VA. VA loans are available through VA-approved lenders, such as banks and mortgage companies.
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Overall, VA loans are a valuable benefit offered to veterans and service members, providing them with opportunities for affordable homeownership and financial stability.