VA Loan
A government-backed mortgage guaranteed by the Department of Veterans Affairs for eligible veterans and military.
What is VA Loan?
A VA loan is a residential mortgage guaranteed by the U.S. Department of Veterans Affairs (VA), available to eligible veterans, active-duty service members, and surviving spouses. The VA guarantee protects lenders against a portion of losses from default, allowing them to offer favorable terms without requiring a down payment or private mortgage insurance. Key benefits include no down payment requirement, no PMI, competitive interest rates, limits on closing costs, and no prepayment penalty. Borrowers do pay a VA funding fee (typically 1.25–3.3% of the loan amount, depending on down payment and whether it's the first use) which can be financed into the loan. VA loans are available only for primary residences. Eligibility is based on service length and character of discharge; veterans must obtain a Certificate of Eligibility (COE) from the VA before applying.
Example
An eligible Army veteran purchases a $350,000 home with no down payment using a VA loan at 6.5% with no PMI. The only upfront cost beyond closing fees is a 2.15% VA funding fee ($7,525), which is rolled into the loan. Compared to a conventional loan requiring 5% down and PMI, the veteran saves approximately $17,500 upfront and $150/month in PMI premiums.
Source: VA — Home Loans