Common Questions about VA Loan Answered

With obtaining home mortgage becoming increasingly difficult, more and more military service members and veterans are choosing a VA loan.

Should you do the same? What benefits does VA loan offer? How much loan you can take?

Read on to know the answers to these questions and much more.


What is a VA Loan?

A VA loan, a mortgage loan guaranteed by the U.S. Department of Veteran Affairs, is available to service members, veterans, and their spouses. Consumers can take it for the purchase of a primary residence, either existing or pre-construction, or for refinancing an existing loan.

Who is Eligible?

A VA home loan is available to someone who meets one or more of the listed conditions:

  • You’ve served no less than 90 consecutive days of active service during wartime
  • You’ve served no less than 181 days of active service during peacetime
  • You’ve served in the National Guard or Reserves for more than 6 years
  • Your spouse died while serving his/her country or because of a service-related disability and you’ve not remarried

What are its benefits?

Some more important benefits of this loan are as follows:

  • Zero down payment (down payment is required only when the purchase price exceeds the appraised value)
  • Interest rates lower than interest rates on conventional loans
  • No private mortgage insurance (results in thousands of dollars of saving over the years)
  • No Pre-payment penalty

How do VA Loans work?

The VA doesn’t offer the loan; instead, it partially guarantees the loan. This guarantee encourages lenders to offer better terms than conventional loans.

What is the Maximum Amount?

The VA does not place a cap on how much someone can borrow; nevertheless, it does set a limit on how much amount it will guarantee. This figure, that is, the amount the VA insures varies. For most places, the cap is $417,000. In high-cost counties, the VA is willing to insure as much as 1 million or slightly more. Veterans can, if a lender is willing, take loans over the maximum loan listed for their county, but then, they will have to make a down payment.

What is a VA funding fee?

VA funding fee is a set fee applied to VA loans and calculated on the basis of several factors.

The funding fee must be paid at closing time and can be clubbed with the loan amount. Many homeowners, in fact, do just that, as they find this way of paying off the fee more convenient.

Combining the funding fee with the loan amount only results in a small increase in the monthly mortgage payment. For instance, a 2.5 percent fee on a loan amount of $200,000 totals to $5000. On a 30-year fixed-rate loan at 6 percent, clubbing the fee with the loan will lead to only a $30 increase in the monthly payment.

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