What is it?
A VA loan is a home loan made to eligible US veterans and their spouses and guaranteed by the US Department of Veterans Affairs. Releatively few people ever default on this type of loan because the Veterans Administration offers services to help struggling veterans make payments. There's even a program for active or deployed service men and women called the Servicemembers Civil Relief Act (SCRA). That program helps lower interest rates or prevent foreclosure for up to nine months after they have finished serving. to help Unsure if you qualify for a VA loan? See the VA Loan qualifications.
Benefits of a VA loan
- No downpayment for qualified borrowers
- No private mortgage insurance (PMI)
- They have a competitive interest rate
- They're often easier to qualify for than a conventional loan
Disadvantages of a VA loan
- They can take slightly longer to close
- You can't include your closing costs and other incidental costs in the loan
- Appraisals for a property--especially fixer-uppers--can be strict
Most veterans using this benefit will have to pay a funding fee, which helps reduce the loan's cost to the taxpayers. The fee amount is determined by the type of loan you're borrowing, the military category you fit into, and the number of times you've used the benefit. You won't have to pay the fee if:
- You're receiving compensation for service-connected disability
- You would be removing compensation for a service-connected disability if you were not receiving retirement or active duty pay
- Your spouse is a veteran who died in service or from a service-connected disability
Is it right for you?
A VA loan is a good option for someone who:
- served in a branch of the U.S. military
- is the unmarried, surviving spouse of a deceased military member
- plans to live in the home they're financing with the loan
Thinking about buying a home? Use our VA loan calculator to estimate your monthly payments and funding fee.