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What Are the Benefits of a VA Loan?

What you'll learn: The reasons why a VA loan may be right for you


VA loans are becoming increasingly popular as home prices increase over the years. The many benefits of a VA loan are designed to help more veterans and service members and make the prospect of home ownership more attainable. What people tend to forget about VA loans, is that they allow you to purchase a home with little or no down payment and typically have better rates.

Do VA loans require a down payment?

One of the best things about VA loans is that — if you are eligible — they do not require a down payment. If you were to compare this single benefit to a conventional mortgage that typically requires at least a 3-5% down payment, it’s easy to understand why a VA loan can open the door to home ownership for many people.

Let’s compare the down payment requirements for a $200,000 home:

  • VA loan: $0 down payment, if qualified
  • Conventional loan: $10,000 down payment, if qualified
  • (Federal Housing Administration) FHA loan: $7,000 down payment, if qualified

When you factor in all the costs associated with purchasing a home — closing fees, title insurance, homeowners insurance, and more — reducing the required down payment to $0 can mean the difference between buying and not buying a home. It can also make a difference in how much home you might be able to afford.

What is private mortgage insurance (PMI)?

PMI is designed to protect the lender should your down payment be less than 20% of the purchase price. VA loans do not require private mortgage insurance. That saves you a significant amount in your monthly bill payments over time.

Using our $200,000 home purchase example above, to avoid paying a monthly PMI premium with a conventional loan, you'd need to have a minimum down payment of at least 20% — or $40,000.

FHA loans, by comparison, have a mortgage insurance premium (MIP) and may require you to pay upfront and annual mortgage insurance. With both PMI and MIP, you could be paying additional insurance payments for many years until you've built up enough equity in your home. In fact, with MIP, you pay the insurance charge for the entire life of the loan.

Are VA loan interest rates better?

Another great benefit of VA loans is that they generally carry lower interest rates than any other home loan. Over the life of the loan, that can save you a significant amount of money.

What are some additional benefits of VA loans?

  • There are no prepayment penalties if you pay off your loan early.
  • It may be possible to use your VA loan entitlement more than once.
  • There are refinance options within the program to reduce monthly payments to a lower interest rate.

To learn more about PenFed VA loans:

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