Common Questions on VA Loans

"Never was so much owed by so many to so few". –Winston Churchill

What Is a VA Loan? The United States Department of Veterans Affairs (VA) has established a program through which service members, veterans and eligible surviving spouses of veterans are assisted in becoming homeowners. The mortgage loans granted through this program are called VA loans. VA sets the qualifying criteria, dictates the terms of the mortgages offered and guarantees the loan. VA home loans are provided by private lenders such as banks and mortgage companies.

How does a VA Loan Work? The VA offers housing-related programs to help qualified veterans or their eligible surviving spouses buy, build, repair, retain or adapt a home for personal occupancy. VA loan recipients do not have to be first-time home buyers. Also, they may reuse the benefits and assign the loan to another qualifying person. 

Are VA loans insured by the United States government? Yes, VA loans are secured through the Government National Mortgage Association (GNMA), also known as Ginnie Mae. As a result, lenders are often more lenient in their lending terms, offer a lower interest rate, and typically do not require mortgage insurance.

Do VA loans cover 100% of the purchase price? Unless the purchase price is above the established property value there is no down payment that is mandated – however with some lenders it may be required.

What are the costs to secure a VA loan? To ensure the continuity of the program the VA charges borrowers a funding fee typically amounting to 2.15% of the purchase price of the home on their first VA loan and 3.3% on additional loans. VA borrowers can roll the funding fee into their overall loan amount. The VA also limits closing costs for veterans and allows sellers to pay most, or all of those expenses.

Does the VA provide other assistance? Additional assistance is available from the VA to help borrowers avoid default. Many states also offer other benefits to veterans such as property tax reductions. For further information, reach out to your local VA office (here is a useful link).

What are cash-out refinance loans? Veterans who hold a mortgage can borrow against their home equity to pay off debt, fund education, or make home improvements. This refinancing option offers a new mortgage for a larger amount than the existing loan and converts the difference into cash.

What are interest rate reduction refinance loans, or IRRRL’s? VA borrowers can obtain a lower interest rate by refinancing an existing VA loan. This VA-loan-to-VA-loan process allows homeowners to refinance a fixed-rate mortgage into a lower interest rate or convert an adjustable-rate mortgage (ARM) into a fixed-rate.

What is a VA renovation and home improvement loan? In April 2018 the VA updated its repair purchase and refinance loan program to allow homeowners to fund VA-approved upgrades to your home or necessary VA-approved repairs to a house you are purchasing. One of the biggest benefits is the ability to borrow up to 100% of the increased value of your home after improvements versus requiring at least 5% equity.

What is the Native American Direct Loan Program (NADL)? The NADL is a program for eligible Native American veterans and their spouses who want to their VA home loan guaranty benefit to finance the purchase, construction, or improvement of homes on federal trust land. Reductions in interest rates also come with these loans.  For more information on the program visit https://www.benefits.va.gov/homeloans/nadl.asp

What are Specially Adapted Housing (SAH) grants? SAH grants are designed to help Veterans living with service-connected disabilities to construct, purchase or remodel a specially adapted home built for their disability.

Conclusion If you are a veteran, you have no reason to apply for any other type of loan. Understand your VA Loan options before you choose a path.