How VA mortgage loans work today. VA loans are only for veterans of the military, whether from the four branches of the military or even the national guard or reserves. Also, spouses of the veterans can use the benefits if the veteran passes away, as long as they do not remarry. VA stands for Veterans Administration because it is the Department of Veterans Affairs that guarantees the loans.
A few of the key benefits of a VA mortgage is that no down payment is required when purchasing a home, there is no mortgage insurance associated with a VA loan, unlike all other mortgages above 80% loan to value. Typically interest rates are more favorable with VA mortgages as well.
VA mortgages require a funding fee if you are purchasing a home or refinancing it. The funding fee can be rolled into the loan and can be anywhere from.50% to 3.3% of the loan amount depending on a number of different factors. In most cases if you are considered disabled by the VA then the funding fee can be waived altogether.
In order to use the VA loan benefit, the veteran will need a certificate of eligibility from the VA Department. Most but not all veterans are eligible to take advantage of a VA loan because of a number of different factors including but not limited to dishonorable discharge, foreclosure while a VA mortgage was in use, current VA loan is already being used, can make a veteran ineligible. You may only use a VA loan one at a time, so if you currently own a home with a VA mortgage on it, you will either have to sell that home or refinance it into another loan product such as an FHA or Conforming loan product. That way you can free up your VA loan eligibility requirement.
Typically VA loans are much easier to qualify for because they are guaranteed by the Federal Government and the banks are more willing to lend their money because in case the borrower were to default the bank will still be paid by the government to cover their losses. Because that is what banks real only concern, the rate at which a default on a loan is likely to occur and what guidelines to set in place to avoid such risk. But if the government steps in to mitigate those losses, then the bank or lender will willing to take on more risk.