How to Shop for a VA Mortgage

February 04th, 2010

If you’re a veteran or spouse of a service person, a VA home loan could be your best home loan. Learn how to get the best interest rate on a VA mortgage here.

The VA began offering home loan guarantees for veterans in 1944 as part of the original GI Bill and since then has guaranteed more than 18 million loans worth $911 billion. Veterans and people serving in the military, as well as their spouses, are eligible for VA mortgages.

Here are four things to consider if you’re thinking about a VA home loan:

No Mortgage Down Payment

No down payment is required on VA home loans up to $417,000 in most parts of the country–and up to higher levels in the most expensive regions. Check with the VA for county-specific loan limits. That doesn’t mean you can’t put money down, and real estate experts say it’s a good idea to pay something upfront. The larger your down payment, the lower your monthly payments will be and the less interest you’ll pay over the course of the loan. Use our mortgage payment calculator to compare monthly payments and total interest on different loan amounts.

No Mortgage Insurance Payment

Thanks to the VA guarantee, you don’t have to pay for private mortgage insurance. Keep in mind, though, you do have to pay loan closing costs plus a funding fee, which ranges from 1.5% to 3.3% and can be financed as part of the loan. Use a closing costs calculator to compare fees you’ll pay with a VA loan versus other alternatives.

Competitive Home Loan Rates

The VA only guarantees the loans; it doesn’t finance them or set rates, so you still have to shop around among VA-approved lenders to find the best deal. Use a loan comparison calculator to compare quotes.

Qualifying Is Not Guaranteed

Eligibility for a VA loan doesn’t guarantee qualifying. If one lender turns you down, try another, and consider an FHA loan if you’re a first-time buyer. Like the VA, the FHA guarantees loans, so lenders are willing to consider borrowers who might have trouble qualifying for conventional mortgages. Unlike a VA loan, an FHA loan requires a down payment–but the requirement is only 3.5%–far less than the 10% to 20% required on conventional mortgages. The FHA also has a loan program for fixer-uppers, which provides money for the purchase price and cost of repairs–an option the VA doesn’t offer.

See the Veterans Administration home loan site for more details on eligibility.

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