VA Home Loans: Zero Down Payment for Those Who Served

VA loans stand out from other mortgage products because of their borrower-friendly terms:

• No down payment required. Qualified borrowers can finance 100% of the home's purchase price, making homeownership accessible without years of saving.
• No private mortgage insurance (PMI). Unlike conventional loans with less than 20% down, VA loans have no ongoing PMI premiums, which can save hundreds per month.
• Competitive interest rates. VA loan rates are typically 0.25% to 0.5% lower than conventional rates because the VA guarantee reduces lender risk.
• Limited closing costs. The VA restricts certain fees lenders can charge, and sellers can pay up to 4% of the purchase price toward the buyer's closing costs.
• No prepayment penalties. You can pay off your VA loan early without any fees.
• Assumable. VA loans can be transferred to a qualified buyer, which is valuable in a rising-rate environment.

To qualify for a VA loan, you must meet minimum service requirements:

• Active-duty service members: Currently serving or have served at least 90 consecutive days during wartime or 181 days during peacetime.
• Veterans: Discharged under conditions other than dishonorable after meeting minimum service requirements.
• National Guard and Reserves: At least 6 years of service, or 90 days of active-duty service under Title 10 orders.
• Surviving spouses: Un-remarried spouses of service members who died in service or from a service-connected disability may qualify.

To verify eligibility, you will need a Certificate of Eligibility (COE), which your lender can request electronically through the VA's system. The process is typically quick, often completed within minutes.

While VA loans do not require PMI, most borrowers pay a one-time VA funding fee. This fee helps sustain the VA loan program and varies based on several factors:

• First-time use with no down payment: 2.15% of the loan amount.
• Subsequent use with no down payment: 3.3% of the loan amount.
• With 5% to 10% down: 1.5% (first use) or 1.5% (subsequent use).
• With 10% or more down: 1.25% regardless of usage.

The funding fee can be financed into the loan amount. Some borrowers are exempt from the funding fee, including veterans receiving VA disability compensation and surviving spouses of veterans who died in service.

VA loans are intended for primary residences and have specific property requirements:

• The property must be your primary residence. You cannot use a VA loan for investment properties or vacation homes.
• The home must meet VA Minimum Property Requirements (MPRs), which ensure it is safe, sound, and sanitary. A VA appraisal verifies these standards.
• Eligible property types include single-family homes, condos in VA-approved complexes, multi-family properties (up to 4 units, with the borrower occupying one unit), and manufactured homes on permanent foundations.

If the appraisal identifies issues, the seller may need to make repairs before closing. Your lender can walk you through any findings that affect your specific property.