If you're a veteran, active-duty service member, or a qualified surviving spouse, you may be eligible for a VA loan—a mortgage loan backed by the US Department of Veterans Affairs (VA). VA loans offer a range of benefits, making homeownership more accessible for those who have served in the military. In this article, we'll cover seven essential facts about VA loans that every potential borrower should know.

1. VA Loans Don't Require a Down Payment

One of the most attractive benefits of a VA loan is that it often doesn't require a down payment. Unlike conventional loans that usually require a down payment of at least 5%-20%, VA loans can be 100% financed. This means you can purchase a home without needing to save for a hefty down payment, making homeownership much more accessible for military families.

2. No Private Mortgage Insurance (PMI) Requirement

Many loans, especially conventional loans with low down payments, require private mortgage insurance (PMI) to protect the lender in case of default. However, VA loans do not require PMI. This can save you hundreds of dollars each month, as PMI fees typically range between 0.3% to 1.5% of the loan amount annually. Not having to pay PMI lowers the overall cost of your mortgage and makes your monthly payments more affordable.

3. Competitive Interest Rates

VA loans often come with lower interest rates compared to conventional loans. Since the VA guarantees a portion of the loan, lenders are able to offer better rates to borrowers. This can result in significant savings over the life of the loan, especially since a lower interest rate reduces the amount of interest you'll pay each month and over the entire term of the loan.

4. VA Loan Eligibility

VA loans are available to veterans, active-duty service members, and certain surviving spouses. Eligibility requirements include:

• Veterans: You must have served a minimum period of active duty (usually 90 days during wartime or 181 days during peacetime).
• Active-Duty Service Members: You may be eligible if you're on active duty, with a certain length of service.
• Surviving Spouses: The spouse of a service member who died in service or as a result of a service-connected disability may also qualify.

It's important to check with the VA or a VA-approved lender to confirm your eligibility before applying for a VA loan.

While VA loans generally do not require a down payment, there are limits to how much you can borrow without making a down payment. The VA does not set a maximum loan amount, but they do limit the amount they’ll guarantee. Loan limits vary by county and are based on the median home price in the area. In some cases, you may be able to borrow more than the limit if you make a down payment, though most borrowers can obtain a home within these limits without needing a down payment.

6. VA Loans Can Be Used Multiple Times

Many people think that once they’ve used their VA loan benefits, they can’t use them again. However, that’s not the case. You can use a VA loan multiple times throughout your life, provided you meet the eligibility requirements. For example, if you sell a home purchased with a VA loan, the entitlement used for that purchase can be restored, allowing you to use your VA benefits again in the future. This flexibility makes VA loans a great option for veterans and active-duty service members who may relocate during their careers.

7. Closing Costs Are Often Lower

While VA loans don’t require a down payment and don’t require PMI, they do have some associated costs. However, closing costs on VA loans tend to be lower than those on conventional loans. The VA limits the fees that lenders can charge, and in some cases, the seller may pay a portion of the closing costs. Additionally, certain fees, such as the VA funding fee (a one-time fee that helps offset the cost of the program), can be financed into the loan, reducing the immediate out-of-pocket costs for the borrower.

Conclusion

VA loans provide an excellent opportunity for eligible veterans, service members, and their families to purchase a home with favorable terms. With no down payment, no PMI requirement, competitive interest rates, and various other benefits, VA loans are a valuable resource for those who have served the country. If you’re eligible, it’s worth considering a VA loan for your next home purchase. Be sure to work with a VA-approved lender to understand your options and take advantage of these unique benefits.