What is a VA mortgage?
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UPDATED: Sep 11, 2012
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A VA mortgage is a home loan for veterans of the armed forces that is backed or guaranteed by the federal government. They are available to veterans, current service members, and surviving spouses that have not remarried.
The goal of the VA home financing program is to help veterans obtain financing for the purchase of homes in gratitude for military service. Through the VA loan program, veterans can qualify for financing of up to 103.15 percent of the price of a property.
Borrowers may be interested to know that the federal government and the Department of Veterans Affairs do not give money to veterans. Instead, lenders such as banks and mortgage companies are guaranteed by the government for the amount of money they lend to veterans. That means if a VA loan borrower is unable to repay their debt, the government pays lenders back for their losses.
Part of the government’s guarantee can include a down payment, meaning that veterans save money by not having to make a huge down payment on a home they wish to purchase. This can be especially beneficial since the military does not typically offer the highest salaries to service members.
However, down payment coverage isn’t always included in the VA lending program. Potential borrowers must remember that not all lenders are the same and that some will require a personal down payment from applicants.
Veterans must also pay a funding fee for their VA mortgage. This funding fee is intended to reduce the cost that taxpayers pay for the VA home loan program.
Surviving spouses of military service members who died can also apply for a VA mortgage so long as they have not yet remarried. The spouses of veterans who are missing in action or prisoners of war are also eligible for financing.
A VA mortgage can be an excellent option for veterans seeking to purchase a home. Interested veterans should still compare lenders and take special note of the different policies and interest rate offers.
Prospective borrowers can also contact their local Veterans Affairs office or visit the Veterans Affairs website in order to confirm their eligibility.