Veterans and other qualified military personnel are eligible to obtain VA loans. These loans may only be made by lenders who have been approved by the US Department of Veteran Affairs. VAs role is to provide a guaranty on the loan that protects the lender against loss if the payments are not made. Because the guaranty is provided by the federal government, lenders are willing to offer VA loans with very favorable terms.
A "VA Funding Fee" is required on most VA loans. The Funding Fee is required by law and is paid to the VA. It is intended to enable the veteran who obtains a VA home loan to contribute toward the cost of this benefit, and thereby reduce the cost to taxpayers. The Funding Fee may be included in the loan amount.
VA loans have numerous features that, when combined together, result in a very advantageous loan. These features include the following:
For veterans with full entitlement, no down payment is required for loan amounts up to
Interest rates that are frequently lower than loans with similar
No monthly mortgage insurance premium to pay.
Fixed interest rate, fixed payments
Adjustable rate loan program with very consumer friendly features
Terms of 15 years and 30 years
Qualification standards that are somewhat easier than most
Conventional mortgage loans
Right to prepay the loan without penalty
An assumable mortgage, subject to VA approval of the assumptor's
VA Loans Vs. Other Types of Loans
In terms of interest rate and Closing Costs, in most cases a VA loan is better than both Conventional and FHA loans. Generally speaking, the only situation when a Conventional loan would have better price than a VA loan is if the borrower is making a down payment of at least 20%.
The only other situations when a Conventional loan should be considered vs. a VA loan is if the loan amount is greater than $240,000, or if the borrower is interested in an adjustable rate mortgage
The only situation when an FHA loan should be considered vs. a VA loan is if the borrower is interested in an adjustable rate mortgage.
Who Is Eligible for a VA Loan?
The following individuals are eligible for a VA Loan:
What Can A VA Loan Be Used For?
A VA loan can be used for the following purposes:
The amount of the Funding Fee will vary depending upon the down payment and veteran classification, as follows:
The Funding Fee does not have to be paid by veterans receiving VA compensation for service-connected disabilities, or who but for the receipt of retirement pay would be entitled to receive compensation for service-connected disabilities, or surviving spouses of veterans who died in service or from a service-connected disability.
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