VA Home Loans Basics.

VA HOME LOANS are mortgages offered by private lenders and guaranteed in part by the Department of Veterans Affairs (VA) to help eligible service members, veterans, and surviving spouses buy, build, or refinance a home. The primary benefit is that they help make homeownership more accessible by removing common financial barriers.

Key Benefits

  • No Down Payment: Most qualified borrowers can purchase a home with no down payment, provided the sale price does not exceed the home's appraised value.

  • No Private Mortgage Insurance (PMI): Unlike conventional loans with less than a 20% down payment, VA loans do not require PMI, which can save hundreds of dollars a month.

  • Competitive Interest Rates: The government guarantee reduces the risk for lenders, who pass the savings to borrowers in the form of competitively low interest rates.

  • Limited Closing Costs: The VA limits certain closing costs that a veteran can pay, and sellers are allowed to contribute up to 4% of the home's value toward these costs.

  • Reusable Benefit: The VA home loan is a lifetime benefit that can be used multiple times, with full entitlement restored once a previous loan is paid off and the property sold.

  • Flexible Credit Guidelines: While the VA does not set a minimum credit score, lenders often have their own requirements, which are typically more flexible than those for conventional loans.

Eligibility Requirements

Eligibility is determined by service history and duty status. General requirements include:

  • Service Duration: Meeting minimum active-duty service requirements (e.g., 90 consecutive days during wartime or 181 days during peacetime) or a minimum of six years in the National Guard or Reserves.

  • Character of Service: The veteran's discharge must be under conditions other than dishonorable.

  • Occupancy: The veteran must occupy the property as their primary residence.

  • Certificate of Eligibility (COE): A COE is required to prove eligibility to the lender. A lender can usually help obtain this, or you can apply online via the VA's eBenefits portal.

Potential Costs and Considerations

  • VA Funding Fee: Most borrowers must pay a one-time VA funding fee, a percentage of the loan amount that helps keep the program running. The fee can be paid at closing or rolled into the loan amount. Veterans receiving VA compensation for a service-connected disability are exempt from this fee.

  • Property Requirements: The home must meet Minimum Property Requirements (MPRs) to be considered safe, sanitary, and structurally sound. A VA-assigned appraiser determines this during the appraisal process.

  • Lender Standards: While the VA guarantees a portion of the loan, private lenders underwrite and approve the loan, setting their own credit score and income standards. Shop around with several lenders to compare rates and terms.

Types of VA Home Loans

  • Purchase Loans: To buy a home or condominium, or to build a new one.

  • Interest Rate Reduction Refinance Loan (IRRRL): A "streamline" refinance to get a lower interest rate on an existing VA loan.

  • Cash-Out Refinance Loan: Allows homeowners to take cash out of their home equity or refinance a non-VA loan into a VA-backed loan.

  • Native American Direct Loan (NADL) Program: A direct loan from the VA to eligible Native American veterans for homes on federal trust land.

( This information is deemed accurate; however, it is provided for informational purposes. Individuals should verify the information with the Veterans Administration & their respective mortgage lenders.)