VA Loan
A VA loan is a mortgage guaranteed by the U.S. Department of Veterans Affairs, available to eligible veterans, active-duty service members, and certain surviving spouses. VA loans offer significant benefits including no down payment requirement and no monthly mortgage insurance.
What This Means
VA Loan Benefits
The VA loan program is one of the most favorable mortgage options available in the U.S. market. Eligible borrowers can finance of the home's value with no down payment, and VA loans carry no private mortgage insurance or monthly mortgage insurance premium requirement. Interest rates on VA loans are typically competitive with or lower than conventional rates due to the government guarantee. The program also limits the closing costs that lenders can charge borrowers.
Eligibility and Entitlement
Eligibility is based on military service history, duty status, and discharge conditions. Borrowers must obtain a Certificate of Eligibility (COE) from the VA to verify their entitlement. VA entitlement determines how much the VA will guarantee, which in turn affects the maximum loan amount available without a down payment. Since January 2020, qualifying borrowers with full entitlement have no VA loan limit . Borrowers with remaining or reduced entitlement may face county-based limits.
Funding Fee
In lieu of mortgage insurance, most VA borrowers pay a one-time VA funding fee that ranges from of the loan amount, depending on the type of loan, down payment amount, and whether the borrower has used VA entitlement previously. The fee can be financed into the loan. Certain borrowers, including those receiving VA disability compensation, are exempt from the funding fee.