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VA Loan Basics: What You Need to Know

What you'll learn: The basics of VA Loans

EXPECTED READ TIME: 2 MINUTES

Why a VA loan?

Assuming you qualify for a VA loan, there can be numerous benefits that make a VA mortgage an attractive choice. 

  • Typically, there are better interest rates for VA loans.
  • It is possible to get 100% of your loan financed, which reduces the necessary amount of cash you need at closing and can reduce your down payment to $0.
  • There is no need for private mortgage insurance (PMI) or mortgage insurance premium (MIP). This can save you a lot of money over the life of the loan as lenders typically require these types of insurance if you put less than 20% down. However, there is no mortgage insurance necessary with a VA loan.
  • Typically, there may be fewer closing costs with a VA loan.
  • There is no prepayment penalty for paying off the loan early.

What credit score do I need for a VA loan?

The U.S. Department of Veterans Affairs (VA) does not require a minimum credit score, but your lender will. As with all loans, having the best credit score you can pay off as it will likely reduce your interest rate. In most cases, a higher credit score equals a lower interest rate. Use this table to determine the state of your credit score:

  580-669

  Fair

  670-739

  Good

  740-799

  Very Good

  800-850

  Exceptional


Having a “good” credit score or above is going to pay off for you in potential interest rate reductions and savings in interest over the life of the loan.

What are VA closing fees?

The VA limits the amount of fees that a lender can charge for VA loans. In addition, there are fees the VA does not allow borrowers to pay for themselves, which are called “non-allowable fees.” Finally, the VA allows sellers to pay all of the loan-related closing costs, as well as have the seller provide up to 4% of the purchase price in concessions. Concessions could include things like prepaid taxes or insurance. 

How do I get a VA loan?

There are three basic criteria you need to meet to obtain a VA loan:

  1. You need to obtain a Certificate of Eligibility (COE). 
  2. You will need to meet your lender’s standards for income, credit, and other requirements.
  3. You must live in the home you are purchasing with the loan.

To learn more about PenFed VA loans or what loan is right for you:

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