VA loan
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What is va loan?
A VA loan is a mortgage for eligible veterans, service members and some surviving spouses, made by a private lender and partly guaranteed by Veterans Affairs.
VA loan questions
- What is a VA loan?
- A home loan for eligible service members, veterans and some surviving spouses. A private lender makes it and the Department of Veterans Affairs guarantees part of it, which lowers the lender's risk and lets it ask less of you.
- Do you need a down payment for a VA loan?
- Often you don't. VA says no down payment is needed if the sale price is no higher than the appraised value. You can still put money down, and on a purchase a bigger down payment lowers the funding fee.
- Does a VA loan have mortgage insurance?
- No. VA loans charge neither private mortgage insurance nor FHA-style premiums. Most borrowers pay a one-time funding fee in its place, which can be rolled into the loan, and veterans who get VA disability compensation skip it.
- Who is eligible for a VA loan?
- Veterans, active-duty service members, many National Guard and Reserve members, and some surviving spouses. You prove eligibility with a Certificate of Eligibility, then meet the lender's credit and income standards for a home you will occupy.
What it means in practice
The Department of Veterans Affairs doesn't lend the money. A bank, credit union or mortgage company makes the loan, and VA guarantees part of it, so VA repays the lender some of its loss if the borrower defaults. Because of that guarantee, many eligible buyers can borrow with no down payment as long as the price isn't above the appraised value, and the loan has no monthly mortgage insurance.
Most borrowers pay a one-time VA funding fee instead. It is a percentage of the loan amount, and the percentage depends on the loan type, whether you have used the benefit before and, on a purchase, how much you put down. You can pay it at closing or add it to the loan. Veterans who receive VA disability compensation are exempt, and so are some surviving spouses.
You need a Certificate of Eligibility, and the home must be the one you live in. The lender still checks your credit and income. Sellers can pay some of your closing costs within VA's limit on concessions, which the closing cost calculator checks for you. A VA loan can later be refinanced with VA's interest rate reduction refinance or a VA cash-out refinance.