What Is a VA Loan?
A VA loan is a mortgage loan that’s backed by the Department of Veterans Affairs (VA) for those who have served or are presently serving in the U.S. military. While the VA does not lend money for VA loans, it backs loans made by private lenders (banks, savings and loans, or mortgage companies) to veterans, active military personnel, and military spouses who qualify.
There are three types of VA loans: purchase loans, interest rate reduction refinance loans and cash-out refinance loans. There are many benefits to a VA loan, but one of biggest benefits is that no down payment is needed to purchase a home. This can make home ownership a reality for active military or veterans who might otherwise not be able to afford it.
Some Basics About VA Loans:
- Qualified active duty service members, veterans, national guard and reserve members
- No down payment
- No prepayment penalty
- No private mortgage insurance to pay each month
- Closing costs can be paid by the seller
- Loans are assumable by qualified borrowers
- Veteran may reuse entitlements
What Are the Benefits?
The VA loan program is offers some of the most attractive and flexible loans available, and they are exclusively for military personnel, veterans and their families. Perhaps the two biggest benefits that make these loan more affordable than a typical loan are that the borrower typically does not need to make a down payment, and there is no private mortgage insurance (PMI) requirement.
Here’s a look at some benefits:
- No down payment required (unless required by the lender or the purchase price is more than the reasonable value of the property).
- Negotiable and competitive interest rate.
- Ability to finance the VA funding fee (plus reduced funding fees with a down payment of at least 5 percent and exemption for veterans receiving VA compensation).
- VA rules limit the amount you can be charged for closing costs.
- Closing costs are comparable with other financing types (and may be lower).
- Closing costs may be paid by the seller.
- No private mortgage insurance premiums are required.
How Can You Get A VA Loan?
Veterans, active military personnel, and military families can follow these steps to get a VA loan:
- Make sure you are eligible for a VA loan. Check the VA website for a detailed list of eligibility requirements for military service members, veterans, and military spouses.
- Find a lender that participates in the VA home loan program.
- Get a Certificate of Eligibility from the VA to prove you are eligible for a VA loan or contact a lender that can request one on your behalf.
- Apply for your VA loan. Your VA lender will work with you to complete the steps needed to finance your home.
Photos/Reference Credit: www.benefits.va.gov/homeloans & zillow.com