What is a VA Loan?

For veterans of surviving spouses of veterans, getting a VA home loan can make financing your house much easier. The U.S. Department of Veteran Affairs (VA) guarantees a portion of VA mortgage loans. In other words, the VA adopts the responsibility of covering any losses that may occur from the loan defaulting. This extra guarantee allows the lender to offer more relaxed guidelines, lower interest, and no down payments. VA loans come in varying amounts, depending upon location and the needs of the lender. However, they all come at zero percent down and the upfront funding fee is rolled into the balance of the loan. These loans may be issued by qualified U.S. lenders and are designed to provide long-term financing to service members, veterans, and their eligible surviving spouses.

How to Qualify for a VA Loan

To qualify for a VA loan, you must identify as one or more of the following:

  • An active service member
  • A member of the National Guard or Reserves for more than 6 years
  • A veteran who has served 90+ consecutive days of active service in wartime and 181+ consecutive days in peacetime
  • A surviving spouse of a service member who has died either in the line of duty or as a result of a service-related injury

In addition to the above requirements, to qualify for a VA loan, you must be able to provide proper documentation, including W2 forms for the last two years, your last two pay stubs, documentation of assets such as bank accounts, and your DD Form 214 (Certificate of Release or Discharge from Active Duty).

Here are some of the VA loan program’s signature benefits:

  • Zero Percent Down: Conventional loans require down payments of as much as 20%, which can make them unaffordable for many service members and veterans. Fortunately for those with full eligibility, VA loans are among the last remaining home loans available on the market that require no down payments.
  • No Monthly Insurance Premiums (PMIs): Unlike other government-backed financing options, VA home loans don’t require borrowers to pay private monthly insurance. VA loans don’t require PMI because the federal government provides the backing and protection that’s usually covered by private monthly mortgage insurance payments. This helps to minimize monthly payments, which will save eligible borrowers thousands of dollars and help build more equity over the life of the mortgage.
  • Lower Interest Rates: Mortgage interest rates are always dependent upon the relative amount of risk assumed by lenders in financing the loan. In carrying federal government backing, VA loans constitute much less risk on the part of the financial institutions acting as lenders. This allows these institutions to offer interest rates that are about 0.5 to 1 percent lower than the interest rates of conventional loans.

How VA Loans Can Help You

The VA loan program offers flexible, government-insured loans with significant benefits to U.S. veterans and their surviving loved ones. With no down payments or mortgage insurance premiums, VA loans offer affordable financing that will make it easier for you and your family to build home equity in the coming years or refinance your mortgage if you so choose in the future.