Knowing how VA loans work can help you through the homebuying journey.
VA loans are a type of mortgage loan available to U.S. military members, Veterans, and their spouses. They can be used to both purchase a house or refinance an existing mortgage, as long as the borrower meets the necessary military service requirements.
The Department of Veterans Affairs (VA) backs VA loans, so private lenders are able to issue them to eligible homebuyers with additional benefits not found in other mortgages. The first step to getting a VA loan is to determine your eligibility.
If you’re interested in using a VA loan to purchase a home, follow these steps:
When compared to traditional mortgages, VA loans offer buyers a significant number of benefits, including:
VA loans also have no loan limits, allowing borrowers to purchase larger homes or homes in pricier markets.
A VA loan is a mortgage that’s guaranteed by the U.S. Department of Veterans Affairs. This allows VA lenders to loan money to borrowers with lower credit scores, no down payments, or other risk factors. It also means lower interest rates as well.
Unlike other loan types, VA loans do not require mortgage insurance, saving borrowers significant money both upfront and over the loan’s term.
Yes, you can have multiple VA loans at once. To qualify for two loans, the total of those mortgages would need to fall under your VA loan entitlement threshold. If you go beyond your entitlement, you’ll need to increase your down payment.
VA loans can be used to buy single-family homes, condos, duplexes, triplexes, and quadplexes. You can also use a VA loan to build one of the above properties from the ground up.
VA loans are designed to help Veterans purchase their primary residences. If you do wish to use your VA loan benefit to buy an investment property, you’ll need to make at least one of the units on the property your primary home. You can then rent out the others.
There aren’t any hard-and-fast limits for VA loans, though each Veteran has what’s called an “entitlement.” You cannot borrow more than your entitlement without making a down payment.
The funding fee is a one-time fee you’ll pay at closing or roll into the loan. Currently, this fee clocks in at 2.15% for first-time borrowers and 3.30% for second-time borrowers. Some borrowers — including those with disability ratings of 10% or higher — can have the funding fee waived.
A VA home loan guaranty means that a purchaser obtains a loan through a private lender, such as a bank, credit union, or mortgage company. VA then works with the lender to guarantee the loan. If the homeowner defaults on the loan, VA will pay the debt to the lender. A VA home loan guaranty offers less risk for a lender.