VA loans are mortgage loans that have a guarantee from the U.S. Department of Veterans Affairs. Available to eligible veterans and to some spouses, VA loans have a number of features that can make them preferable to other types of mortgages.
Who Is Eligible for VA Loans?
- Eligibility depends on military status: To qualify for VA loans, veterans must not have been dishonorably discharged from service and meet minimum active-duty requirements of between 90 days and 24 months, depending on when the veteran served. Members of the National Guard or Reserves need six years of service to qualify.
- How spouses can be eligible: Spouses of prisoners of war or those missing in action can get VA loans, as can surviving spouses of deceased veterans if the veteran's death was service-related. Spouses must not remarry in order to retain eligibility, unless they wait until they reach age 57.
- Funding fee: Veterans who want VA loans must pay a funding fee. The fee is a percentage of the loan amount and varies depending on the type of loan, your military category, whether it's your first VA loan, and whether you make a down payment.
Advantages of VA Loans
- No down payment: As long as the sales price of the home is less than the appraised value, no down payment is required on a VA loan.
- No private mortgage insurance premiums: Most mortgage loans require homeowners to pay for private mortgage insurance if they don't put at least 20% down, but VA loans don't have that requirement.
- Credit requirements are favorable: VA loans generally have less restrictive credit provisions, allowing borrowers to get VA loans who might not qualify for other types of mortgages.
- Closing cost advantages: VA rules limit how much lenders can charge in closing costs. Under some circumstances, sellers can pay closing costs, saving borrowers money.
- Easier refinancing process: VA loan borrowers can apply for VA Interest Rate Reduction Refinance Loans to cut their interest rates and reduce their monthly payments. The refinancing process is simpler than with other mortgages, with no appraisal or credit underwriting check needed.
VA loans are an important benefit veterans can use to make it easier to purchase a home. Veterans should always check their VA loan options when shopping for a mortgage to see if its terms are better than what they can get from other types of mortgage loans.