Understanding VA loans

By
Mortgage and Lending with Academy Mortgage NMLS#329710

VA loan

A VA loan is a mortgage loan in the United States guaranteed by the U.S. Department of Veterans Affairs. The loan may be issued by qualified lenders.

The VA loan was designed to offer long-term financing to American veterans or their surviving spouses (provided they do not remarry).

The VA loan allows veterans 100% financing without private mortgage insurance or 20% second mortgage. A VA funding fee of 0 to 3.3% of the loan amount is paid to the VA and is allowed to be financed. In a purchase, veterans may borrow up to 100% of the sales price or reasonable value of the home, whichever is less. In a refinance, veterans may borrow up to 90% of reasonable value, where allowed by state laws.

As of January 1st, 2006, the maximum VA loan amount with no down payment is $417,000 and can be as high as $625,500 in certain high cost areas. VA also allows the seller to pay all of the veteran's closing cost as long as the cost do not exceed 6% of the sales price of the home.


Funding Fees

Purchase And Construction Loans
Note: The funding fee for regular military first time use from 1/1/04 to 9/30/04 is 2.2 percent. This figure drops to 2.15 percent on 10/1/04.

Type of VeteranDown PaymentFirst Time UseSubsequent Use for loans from 1/1/04 to 9/30/2011
Regular MilitaryNone
5% or more (up to 10%)
10% or more
2.15%
1.50%
1.25%
3.3%*
1.50%
1.25%
Reserves/National GuardNone
5% or more (up to 10%)
10% or more
2.4%
1.75%
1.5%
3.3%*
1.75%
1.5%

Cash-Out Refinancing Loans

Type of VeteranPercentage for First Time UsePercentage for Subsequent Use
Regular Military2.15%3.3%*
Reserves/National Guard2.4%3.3%*
* The higher subsequent use fee does not apply to these types of loans if the veteran's only
prior use of entitlement was for a manufactured home loan.

Other Types Of Loans

Type of LoanPercentage for Either Type of Veteran
Whether First Time or Subsequent Use
Interest Rate Reduction
Refinancing Loans
.50%
Manufactured Home Loans1.00%
Loan Assumptions.50%

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