Should You Take Advantage of VA Loan Benefits?

It’s certainly worth looking into if you are:
  • A Veteran
  • Active-duty personnel
  • Reservist/National Guard member
  • An eligible surviving spouse

What makes a VA home loan particularly appealing for many eligible veterans (and their families, when applicable) is that a down payment is not required and they can finance more than 80% of a home’s value or purchase price because mortgage insurance is not required.

There are some drawbacks too, though, and we’ll guide you through all the questions you’ll want to ask before applying for a VA mortgage. If you’ve already done your homework and know that a VA home loan is right for you, check out our VA Fast Track to get started on your home purchase, renovation or refinance, or get VA mortgage quotes from competing lenders.

See if a VA mortgage is right for you

Common VA Mortgages

All home loans are not created equal. And VA home loans are a perfect example that government loans can be pretty diverse. Here are some of the most popular mortgage types that VA mortgage lenders offer. The VA guarantees loans to purchase homes made with the following repayment plans:

Glossary Terms

VA Loan
A VA loan is made by an approved lender and guaranteed by the Department of Veterans Affairs. <a href='/glossary/what-is-va-loan' title='See the full definition of VA Loan'>read more</a>
VA Amendatory Clause
This is added to your purchase agreement, must be signed by you and your seller.... <a href='/glossary/what-is-va-amendatory-clause' title='See the full definition of VA Amendatory Clause'>read more</a>
Funding Fee Clause
Lets you know, if you assume a VA mortgage, that a .50 point funding fee is due or will be added to the loan amount... <a href='/glossary/what-is-funding-fee-clause' title='See the full definition of Funding Fee Clause'>read more</a>
Assumption Indemnity Clause
Buyers who take over a VA mortgage must agree to assume all of the obligations of the veteran under the terms of the instruments creating and securing... <a href='/glossary/what-is-assumption-indemnity-clause' title='See the full definition of Assumption Indemnity Clause'>read more</a>

What is a VA Loan?

VA loans are home loans designated specifically for people who have served, or are presently serving, in the U.S. military who want to purchase a primary residence.

VA Home Loans were first made available in 1944 when The Servicemen’s Readjustment Act added this additional benefits package to eligible service members. They are administered by the U.S. Department of Veterans Affairs (VA). The VA does not actually lend anyone money; it backs these loans and reimburses private lenders if borrowers default on them. Because this provides a safety net for these lenders, VA loans are widely available and at a reasonable cost.

VA Mortgage lenders offer a variety of home loans that cover a broad range of needs, including:
  • Building a single family home
  • Buying a single family home, a condominium unit in a VA-approved development, or a co-op unit
  • Repairing, renovating or upgrading your primary residence
  • Refinancing a mortgage
  • Buying a manufactured home and/or lot
  • Making energy-efficient improvements like solar heating or cooling systems

The Benefits of a VA Loan

There are many benefits to if you choose a VA home loan. According to the U.S. Department of Veterans Affairs:

  • No down payment required (unless required by the lender or the purchase price is more than the reasonable value of the property)
  • Buyer informed of reasonable value
  • Negotiable interest rate
  • Ability to finance the VA funding fee (plus reduced funding fees with a down payment of at least 5 percent and exemption for veterans receiving VA compensation)
  • Closing costs are comparable with other financing types (and may be lower).
  • No mortgage insurance premiums
  • An assumable mortgage
  • Right to prepay without penalty
  • For homes inspected by VA during construction, a warranty from builder and assistance from VA to obtain cooperation of builder.
  • An assistance to veteran borrowers in default due to temporary financial difficulty
80%
of VA Loan borrowers could not qualify for a conventional loan
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Frequently Asked Questions

Is the home I want to buy or refinance my primary residence?

VA mortgages cannot be used to buy rental property or vacation homes. You can, however, rent out the other units of a duplex, triplex, or four-plex as long as you live in one unit. Veteran must certify that they intend to occupy the home as their principal residence and move in within 60 days of closing. Your spouse can usually satisfy the occupancy requirement if you’re on active duty. If not married and on active duty, you must occupy the home within 12 months. Intermittent occupancy by single veterans is typically not acceptable, and family members, friends and relatives cannot satisfy the occupancy requirement on your behalf.

Do I need a little extra help qualifying for my mortgage?

VA underwriting guidelines are more flexible than those of most conventional mortgage lenders. For example, if you filed for Chapter 7 bankruptcy protection, you’ll need to wait four years in most cases to qualify for a conventional Fannie Mae or Freddie Mac loan (two years if underwriters feel it was caused by factors beyond your control – this is rare). You’d be eligible for VA financing in only two years, and possibly even sooner if you could prove that the bankruptcy was not your fault. In addition, VA mortgage lenders impose no minimum credit score requirements.

What if you allow someone to assume your VA mortgage?

In this case, your eligibility can be restored only if the qualified assumer is also an eligible veteran who is willing to substitute his or her available eligibility for yours. Otherwise, you cannot have eligibility res-tored until your buyer has paid off the VA loan.

Will I be putting less than 20 percent down on a home purchase, or refinancing with less than 20 percent home equity?

Conventional (non-government) home loans exceeding 80 percent of your home’s value require private mortgage insurance (MI), which you must qualify for and pay for. The VA mortgage guaranty is paid for upfront with a funding fee, which you can pay out of pocket or add to your loan amount. The funding fee may be waived for disabled vets.

Can you re-use your eligibility?

You can re-use your eligibility for VA financing if you sell your home and pay off the mortgage. However, you can’t have more than one VA loan at a time. If you pay off your VA mortgage but still own the property, you can restore your eligibility and get another VA mortgage, but you’re allowed to do this only once. To restore your eligibility, you send a completed VA Form 26-1880 to the Atlanta Eligibility Center. In-clude evidence that the prior loan has been paid in full, and, if applicable, that the property was sold. This evidence can be in the form of a paid-in-full statement from the former lender, or a copy of the HUD-1 settlement statement completed in connection with a sale of the property or refinance of the prior loan.

What about partial eligibility?

If you used only a portion of your eligibility and the used portion cannot yet be restored, any partial remaining eligibility would be available for use. You need to check with a lender to see if the remainder is sufficient for the loan amount sought and whether any down payment is needed.