What Exactly Are VA Loans?

A VA mortgage loan (also known as a Veterans Administration home loan) is one of the most useful military benefits. If you qualify, you can buy or build a home, or refinance an existing home mortgage, with as little as $0 down, great rates, and financing up to $484,350 (2019 limit) – more if you live in certain high-cost areas like New York City.  Another benefit over traditional mortgages is that there is no PMI (Private Mortgage Insurance, the monthly insurance fee charged to protect the bank until you reach at least 20 percent equity).

For most service-members and veterans who qualify, a VA loan is one of their most valuable benefits and a no-brainer over other, traditional mortgage types. This section offers an in-depth explanation of the VA loan process, and instructions on how to submit an application.

VA Loan VS. Conventional Home Loans

VA loans are some of the only loans remaining that offer no down payment.  With conventional loans, the buyer is required to provide up to 20% down, which can often make it too difficult to purchase the right type of home for your family.  Since with a VA home loan there’s no private mortgage insurance this can save hundreds of dollars a month over conventional loans, depending on how much you borrow.  Because the VA loan is backed by the government, the rates are often much better than a conventional loan, which will save you a considerable amount of money over the life of your home loan.  Lastly, the VA home loan has a more lenient lending policy, allowing you to qualify for a VA loan when you might not meet all the requirements for a traditional loan.

VA Loan Basics

While VA Loans are issued by private lenders they are backed by the U.S. Department of Veterans Affairs, which is why they can be offered oftentimes with little to no down payment and no PMI.  Since 1944, the VA has helped over 22 million military men and women purchase homes using this type of mortgage program.

VA Loan Funding Fee

Nearly every VA loan comes with a VA Funding Fee.  This fee goes directly to the Department of Veterans Affairs and helps back the VA loans of the future.  Not everyone has to pay the fee, such as military men and women with a service-related disability.  Fees range from a little over 2% for first time VA loan recipients, to 3.3% for repeat home buyers.  The good news is you can roll this fee into your loan amount.  In addition, closing costs are less and often the seller can pay these costs, too.

VA Loan Limits

As of 2019, the VA allows for no down payment on loans up to $484,350.  This does not mean that’s all a veteran can qualify for, it means that’s the limit in most cities you can secure a mortgage with no down payment.  In cities that are more expensive to live in, that number rises. For example, in New York City the maximum you can qualify for with no down payment is over $726,000.

How Much Can I Qualify for on a VA Loan?

The amount you can qualify for varies depending on a number of factors. One of the biggest factors is your debt ratio.  It helps to determine the amount you can afford to pay each month.

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