The Department of Veterans Affairs (VA) loans are available to eligible veterans, active duty servicemembers, and certain other reservists and National Guard members. The VA does not issue the loan but guarantees payment to the lender, up to the guaranteed amount, should the veteran default on the loan.
The Bottom Line
Property Restrictions: Must be used for primary residence. Can be used to buy land if it is in conjunction with building a home on that land. Cannot be used for vacation or investment property.
Credit Score: Most lenders require at least a 600-credit score. Some lenders will go as low as a 580, but these loans usually offer subprime interest rates which are higher.
Down Payment: No down payment is required.
Mortgage Insurance: No mortgage insurance is required.
Closing Costs: Sellers, builders and lenders can contribute towards the borrower’s closing costs. Closing costs can average between 3-4% of the sales price.
Funding Fee: The cost associated with obtaining a VA loan. This cost is waived for certain servicemembers. Check your Certificate of Eligibility (COE) to see if you are exempt from this payment. If not, the funding fee can be incorporated into the loan.
Refinance Options: You can refinance your existing VA loan for a lower interest rate and/or payment. Also, eligible owners who financed their home with a loan other than a VA loan may refinance that loan into a VA loan.