What is a VA Loan?

Find out the details on this specific loan type and see how to qualify!

When buying a house there are many mortgage or loan options to look at. One unique option is the VA loan, available to only people who qualify. This loan is backed by a federal government agency, the United States Department of Veteran Affairs. It is issued by banks or other types of private lenders to homebuyers. The VA loan was created in 1944 after the Second World War to help returning service members purchase a home who didn’t have stellar credit or who could not afford to purchase a house. With home prices increasing and there being less support for our veterans, the VA loan is a very popular and useful benefit.

Requirements

Qualifying for a VA loan is fairly simple. In order to get a VA loan, you must meet the following criteria:

• Served 90 consecutive days of active duty during wartime
• Served 181 days of active duty during peaceful times
• More than 6 years of service in the National Guard or Reserves

If you meet the above requirements, then you may be able to get a VA loan. It is also available to not only people who served, but additionally their spouse as well as other eligible beneficiaries.

Benefits

There are many benefits to getting a VA loan as opposed to a conventional loan. Some of the benefits of this type of loan are:

• 0% down payment
• While you can pay 0% down, you can also opt to pay a down payment to reduce the cost of the loan and pay a smaller loan funding fee.
• No mortgage insurance is required because the loan is government backed
• Competitive interest rates giving the loan a more competitive rate than a conventional loan
• Easy veteran qualification
• With the loan being government-backed, there is less risk assumed by bank

VA Funding Fees

In order to keep the program running for later veterans, the loan also has funding fees associated with it. The only way to reduce or bypass them entirely is by making a down payment, which is not required with this loan. The fee amount will vary depending on the circumstances of the borrower, but it can be typically between 2–4% of the purchase price of the home. Doing this also allows the seller to pay a majority or entirety of the closing costs of the house.

Final Thoughts

A VA loan is a fantastic option for home buyers who qualify. It allows a lot of benefits that many don’t get access to. Additionally, the loan comes with great rates with no money down on the front end, making it easy for first time homebuyers or homebuyers without good credit. If you qualify, look into applying for a VA loan before you purchase your next property.