What are VA loans?
VA loans are a type of mortgage available to assist active service members, veterans, and surviving spouses in buying, building, and retaining a home. The loan is available through private lenders (banks, mortgage companies, credit unions) and not the U.S. government. The United States Department of Veterans Affairs (VA) however, assures the lending agency it will be repaid if the borrower can no longer make payments.
VA loan quick view
- 0% down payment
- No prepayment penalty
- No reserve requirements at closing
- Out-of-pocket expenses may be gifted
- Available for residential homes, not vacation homes or investment properties
- Properties must meet VA guidelines and be inspected by VA-approved appraisers
- Subject to loan limit set by VA
- Simple & secure online application
How are VA loans different than conventional loans?
Conventional loans are available to all borrowers who meet the minimum requirements of the private lending institution. VA loans are a government-backed loan available to those who meet set criteria – those who are active U.S. military service members, veterans, or surviving spouses.
Can you get a VA loan more than once?
You can use a VA home loan benefit as many times as you like. However, you must pay off your original loan completely to have your entitlement restored in full. Some veterans who purchased a first home through a VA loan will pay off their original mortgage, keep their home, and finance a second home with their fully restored VA loan entitlement.
Advantages of a VA loan
One of the primary advantages is that, unlike conventional loans, VA loans are offered to borrowers with 0% down payment, no mortgage insurance fees, and no debt-to-income ratio requirements. The VA does not set a minimum FICO credit score for eligibility, though each mortgage lender may have their own. They also tend to have lower interest rates than conventional loans.
Disadvantages of a VA loan
These loans can only be used for primary residence dwellings, not vacation homes or investment properties. There is a one-time upfront funding fee that will be charged to borrowers of between 1.4% and 3.6% of the loan amount (this fee is waived for borrowers with a service-connected disabilities). The fee can be paid at closing or rolled into the mortgage amount (which will increase the monthly payments and interest paid over the life of the loan).
Who should consider a VA loan?
Active or retired U.S. military service members and their surviving spouses should all consider a VA loan and compare the benefits of it to a conventional or other government-backed loan. A conventional loan might be a better choice for veterans who have a 20% down payment as to avoid the VA loan funding fee. Contact a local VA loan specialist to see which loan is right for you.