NO DOWN PAYMENT, NO PRIVATE MORTGAGE INSURANCE (PMI)
These are perhaps the biggest advantages to a VA loan. A Veteran does not need a down payment. Most mortgage programs, such as FHA and conventional loans, require at least 3.5 percent to five percent down. That’s up to $12,500 on a $250,000 home purchase. With a VA loan, a Veteran can buy immediately, rather than years of saving for a down payment. Additionally, with a VA loan, Veterans also avoid steep mortgage insurance fees. Private mortgage insurance (PMI) typically costs between 0.5% to 1% of the entire loan amount on an annual basis. On a $100,000 loan, a homeowner could be paying as much as $1000 a year, or $83.33 per month – assuming a 1% PMI fee. At 5 percent down, private mortgage insurance (PMI) costs $150 per month on a $250,000 home, according to PMI provider MGIC. With a VA loan, a Veteran buyer could afford a home worth $30,000 more with the same monthly payment, simply by eliminating PMI.
The VA Home Loan Can Be Used Repeatedly. The VA home loan benefit is not one-and-done. It can be used repeatedly. Here’s how. Assume the Veteran purchased a home with a VA loan. But now, they’ve outgrown the home and need something bigger. When they sell the home and pay off the VA loan completely, they can re-use the benefit to buy another home. The entitlement is restored in full. The VA Home Loan Benefit Never Expires…no matter when the entitlement was earned.
*The information below is from the Veterans Administration’s website at VA.gov.
VA home loan types
The VA home loan programs help you buy, build, or improve a home or refinance your current home loan—including a VA direct loan and 3 VA-backed loans. Learn more about the different programs, and find out if you can get a Certificate of Eligibility for a loan that meets your needs.
How does a VA direct home loan work?
With a VA direct home loan, we serve as your mortgage lender. This means you’ll work directly with us to apply for and manage your loan. The Native American Direct Loan (NADL) program often has better terms than a home loan from a private lender (a private bank, mortgage company, or credit union). Find out if you qualify for a NADL
How does a VA-backed home loan work?
With a VA-backed home loan, we guarantee (or stand behind) a portion of the loan you get from a private lender. If your VAbacked home loan goes into foreclosure, the guaranty allows the lender to recover some or all of their losses. Since there’s less risk for the lender, they’re more likely to give you the loan under better terms. In fact, nearly 90% of all VA-backed home loans are made without a down payment. Lenders follow our VA standards when making VA-backed home loans. They may also require you to meet additional standards before giving you a loan. These standards may include having a high enough credit score or getting an updated home appraisal (an expert’s estimate of the value of your home).
Explore different loan types
• Purchase loan
Looking to buy a home? Find out if you’re eligible for a VA backed purchase loan to get better terms than with a private lender loan.
• Native American Direct Loan (NADL) program
Are you a Native American Veteran or a Veteran married to a Native American? Find out if you’re eligible for a NADL to buy, build, or improve a home on federal trust land.
• Interest Rate Reduction Refinance Loan (IRRRL)
Have an existing VA-backed home loan? Find out if you’re eligible for a VA-backed IRRRL to help reduce your monthly payments or make them more stable.
• Cash-out refinance loan
Want to take cash out of your home equity to pay off debt, pay for school, or take care of other needs? Find out if you’re eligible for a VA-backed cash-out refinance loan.