The Department of Veterans Affairs offers one of the most popular loans in America. In fact, since the end of World War II, more than 22 million veterans and military members have bought homes with the aid of VA loans.
What makes VA loans so appealing is the no-down-payment requirement for most loans. This is a huge benefit and allows many more home buyers – especially in difficult housing and financial markets – to buy a home.
The VA doesn’t actually offer loans – it simply insures loans that are written by banks and mortgage companies. This is similar to how an FHA loan works with a few exceptions – the main one being that VA loans are only available for veterans and active duty members of the U.S. military and their surviving spouses.
What Are the Benefits of a VA Loan?
For home buyers, the VA loan offers several major benefits. Let’s take a second to go over those before we go any further:
- The ability to get into a home without a down payment. If you have the income to buy a home, you don’t have to spend extra time saving up a down payment.
- When you take cash out of your home, you only need to maintain 10% equity. This means you can convert more of your existing equity into funds that you can use to give your retirement a boost, start a college fund or do a home improvement project.
- Instead of mortgage insurance, there’s a one-time funding fee that can be paid at closing or built into the loan.
- There are a variety of loan options, including several different term lengths as well as both fixed and adjustable rate mortgages (ARMs).
Frequently Asked Questions About VA Loans
At Quicken Loans, we’re proud that our simple mortgage process allows for a quick and easy way to get a VA loan. Our Home Loan Experts are always available if you have any questions. Let’s dive into some of the most frequently asked questions about VA loans.
Quicken Loans is a VA approved lender. We’re not endorsed or sponsored by the Department of Veterans Affairs or any government agency.
Do You Have To Pay Closing Costs with a VA Loan?
The lender may charge reasonable closing costs. The following items may be paid by the veteran purchaser, the seller or shared between both:
- VA appraisal
- Credit report
- Loan origination fee
- Discount points (pre-paid interest)
- Title search and title insurance
- Recording fees
- State and/or local transfer taxes, if applicable
No commissions, brokerage fees or “buyer broker” fees may be charged to the veteran buyer.
Can You Add Closing Costs into VA Loans?
For costs being paid by the veteran buyer, there’s the option to have them included in the loan in the form of lender credits.
If a credit is applied, the lender is fronting all or a portion of the closing costs in exchange for a slightly higher interest rate. On VA loans, there’s no limit to lender credit amounts.
What Is the VA Loan Funding Fee?
The VA charges a funding fee that covers the cost for the VA to manage their loan program. The VA loan funding fee is meant to lessen the burden on taxpayers for providing VA loan insurance and keeping VA loans as a viable benefit for veterans and military folks for generations to come.
The loan funding fee serves a similar function to mortgage insurance with a key difference – instead of a monthly charge, it’s paid at closing or financed into the loan.
The funding fee varies according to several factors, including the following:
- Type of loan
- Your military status
- Amount of your down payment (on purchases)
- Whether it’s your first VA loan
You can speak with one of our Home Loan Experts to find out what funding fee applies to your situation.
Eligible surviving spouses and veterans with disabilities are exempt from having to pay the VA loan funding fee.
Can You Get Help Paying for Closing Costs?
If you’re getting a VA loan, you do have the option of applying for grants through nonprofit agencies and others in order to pay for closing costs. This could be helpful for qualified applicants who don’t have a ton of extra money to bring to the table at closing.
There may be specific grants for veterans, but you can also look at grants for first-time home buyers and anything else that’s applicable in your situation.
If you’re looking to purchase, VA loans are the best deal available if you’re a current or former member of the armed services or if you’re a surviving spouse.
Ready to buy? Get started online or give one of our Home Loan Experts a call at (800) 785-4788. If you still questions, we can answer them for you in the comments below.
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