What is a VA loan?
Veterans Affairs mortgages, better known as VA loans, offer considerable benefits for eligible military veterans, service members and spouses who want to buy a home.
The main draw of VA loans is that they make it easier to get financing by offering no down-payment loans and more lenient credit and income requirements than conventional mortgages.
The loans have competitive rates compared with traditional bank financing. VA loans consistently offer the lowest rates on the market, according to reports by mortgage software firm Ellie Mae.
These home loans are made through private lenders and are guaranteed by the Department of Veterans Affairs, so they don’t require private mortgage insurance, known as PMI. The U.S. Department of Veterans Affairs is not a direct lender. The loan is made through a private lender and partially guaranteed by the VA, as long as guidelines are met.
If you think you may be eligible for a VA loan, here are some things to know about the program.
What are the VA loan eligibility requirements?
Most members of the regular military, veterans, reservists and National Guard are eligible to apply for a VA loan. Spouses of military members who died while on active duty or as a result of a service-connected disability also can apply.
Active-duty military personnel generally qualify after about six months of service. Reservists and members of the National Guard must wait six years to apply, but if they are called to active duty before that, they gain eligibility after 181 days of service.
You may qualify if you:
- Served 90 consecutive days of active service during wartime
- Served 181 days of active service during peacetime
- Have been an active member of the National Guard or Reserves for 6 years or more
- Are married to a service member who died in the line of duty or as a result of a service-related disability
Do VA loans require PMI?
Unlike other low down-payment mortgage options, a VA loan doesn’t require PMI. Federal Housing Administration (FHA) loans and conventional loans with less than 20 percent down require PMI, which can end up costing the borrower thousands over the life of the loan.
The benefit translates into significant monthly savings for VA borrowers. For instance, a borrower who makes a 3.5 percent down payment on a $200,000 FHA-insured mortgage would pay $100 a month for mortgage insurance alone.
What are VA loan funding fees?
Although the costs of getting a VA loan are generally lower than other types of low-down-payment mortgages, they still carry a one-time funding fee that varies, depending on the amount of the down payment and military category. This fee helps offset taxpayers’ costs since there’s no PMI or down payment required.