VA (Veterans Affairs) Loans are similar to FHA loans in that they are backed by the Federal Government. In this case, however, these loans are only available to Veterans of the American Armed Forces. VA Loans can take it a step further, however, in that they do not require any down payment from the borrower. Obviously, there are other factors that could impact this (Such as the appraised value being lower than the sales price, meaning the difference has to be made up somewhere.), but generally speaking, this is a non down payment type of loan.
One thing to keep in mind with VA Loans, however, is the VA Funding Fee. This fee is currently set at 2.15% on home loans with no down payment. If you do have a down payment, this can reduce your Funding Fee, down to as low as 1.25% if you have a down payment of 10% or more. Also, if you sell your new home at some point and use a VA Loan to buy your next home, your Funding Fee will increase. There are some differences in fees specifically for Veterans who fall into the categories of Reserves/National Guard, with the no down payment fee coming in at 2.4% and the lowest fee coming in at 1.5%.
The VA Funding Fee is able to be rolled into the loan, which is a helpful feature. This means you will have a higher starting loan amount than the actual purchase price, and you may begin your home ownership with negative equity (owing more than your house is worth), but in the end a VA Loan will almost always save you money as compared to other conventional home loan products.
If you would like to talk with a mortgage loan specialist, please fill out the form to the right and we’ll put you in touch with a lender or broker who can help you get started on your way to getting a home loan!