The Veterans Affairs (VA) developed the VA Loan so that active duty military personnel and veterans would be able to purchase or refinance homes that they may otherwise be unable to finance.

Purchasing a Home

The VA offers 100% home loan financing at low fixed and adjustable rates. The loan requires no money down. Instead on focusing on credit scores, the VA underwriters are interested in the Veteran’s ability to repay the loan. The VA charges a “funding fee” to off-set the need for mortgage insurance. The typical funding fee (2.15%) is added on to the loan amount and is financed. There is no monthly mortgage insurance.  The VA will also waive the funding fee for disabled Veterans.

VA will let a Veteran to use a VA loan 2 years after the date of a foreclosure as long as there is no major derogatory credit after the foreclosure.

Other benefits of a VA loan include: 

• Negotiable interest rates
• Closing costs are comparable, and sometimes lower, than other financing types
• No private mortgage insurance is required
• No pre-payment penalties
• A mortgage can be taken over (or “assumed”) by the buyer when a home is sold
• Counseling and assistance is available to veteran borrowers having financial difficulty or facing default on their loan

VA Funding Fees

Type of Veteran         % for 1st Time Use      % for Subsequent Use

Purchase Transaction 

  Regular Military

• No Down Payment        2.15%                     3.30%*

• 5% to 10%              1.50%                     1.50%

• 10% or More            1.25%                     1.25%

 Reserves/National Guard

• No Down Payment        2.40%                      3.30%*

• 5% to 10%              1.75%                      1.75%

• 10% or More            1.50%                      1.50%

Cash Out Refinances 

  Regular Military           2.15%                      3.3%*

  Reserves/National Guard    2.40%                      3.3%* 

                *The higher subsequent use fee does not apply to these types of loans if the veteran’s only prior use ofentitlement was for a manufactured home loan.

Type of Loan Percentage for Either Type of Veteran Whether First Time or Subsequent Use

IRRRLs                                                                                              .50%   

Veteran’s rated with more that 10% disability from the VA may not have to pay a funding fee.