What is a VA Loan
A VA loan is a mortgage loan on real estate in the United States that is guaranteed by the U.S. Department of Veterans Affairs (VA). This loan is available through qualified VA home loan lenders.
The VA loan was designed to offer long-term financing to eligible American veterans and their surviving spouses (they cannot remarry). It was the original goal of the VA direct home loan program is to supply mortgages to eligible veterans in areas where financing options were limited and to help veterans purchase properties with no down payment.
The best part about the VA loan is that it allows veterans to borrow 102.15% of the value of a home without private mortgage insurance or a 20% second mortgage and up to $6,000 for energy efficient improvements. There is a VA funding fee of 0 to 3.15% of the loan amount is paid to the U.S. Department of Veteran Affairs (this fee may also be financed). In a purchase, veterans may borrow up to 102.15% of the sales price or reasonable value of the home, whichever is less. Since there is no monthly PMI, more of the mortgage payment goes directly towards qualifying for the loan amount, allowing for larger loans with the same payment. In a refinance, veterans may borrow up to 90% of reasonable value, where allowed by state laws.
VA loans allow veterans to qualify for loans amounts larger than traditional Fannie Mae / conforming loans. VA will insure a mortgage where the monthly payment of the loan is up to 41% of the gross monthly income vs. 28% for a conforming loan assuming the veteran has no monthly bills.
To learn more about VA home mortgages, click here.