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What Is a VA Loan?

What you'll learn: The basics of a VA loan and their benefits


The U.S. Department of Veterans Affairs (VA) Home Loan Guaranty Program was created around the time of World Word II, and is designed to offer veterans, service members, and military families an opportunity to achieve the American dream of home ownership. In general, VA loans offer a number of financial benefits that place the prospect of buying a home into the hands of more people who otherwise may not have the opportunity.

VA loans are government-backed loans that offer highly competitive interest rates with little to no down payment required.

How do I get a VA loan?

To obtain a VA-backed purchase loan, you must meet three criteria:

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

What are the benefits of a VA loan?

If you qualify, there is a long list of benefits that make VA loans an attractive alternative to a conventional loan. In comparison with the latter, VA-backed purchase loans typically offer the following:

  • VA loans generally have better terms and interest rates.
  • There is typically no down payment required for a VA loan, as long as the purchase sales price of the home does not exceed the appraised value of the home.
  • There is no need for either private mortgage insurance (PMI) or a mortgage insurance premium (MIP). PMI is designed to protect a lender when the down payment for a home is less than 20% of the mortgage amount. MIP is what the Federal Housing Administration (FHA) requires self-insuring your loan against potential loss.
  • VA loans usually incur fewer closing costs.
  • There is no penalty for paying off a loan early.

Who is eligible for a VA loan?

There are general guidelines for VA loan eligibility, but they vary slightly based on whether you're a veteran, on active duty, or serve/have served in the National Guard or Reserve. Here are a few basic guidelines to be aware of:

  • Any veteran who served after August 2nd, 1990 is eligible if they served for 24 continuous months.
  • Anyone who is current active-duty is eligible after 90 continuous days of service.
  • National Guard members and Reservists become eligible after 90 continuous days of service.

How do I apply for a VA COE?

If you're a veteran, you'll need a copy of your separation papers (DD214) in order to apply for a COE. If you're a service member or a current or former National Guard member or Reservist, the requirements are slightly different. To learn more about these differences how to apply for a COE, visit the U.S. Department of Veterans Affairs

How can I use my VA loan?

In general, you can use a VA-backed purchase loan for the following:

  • To buy a single-family home
  • To build a new home
  • To buy a home and improve it
  • To buy a condo (within a VA approved project)
  • To buy your first home
  • To reuse your VA benefit to sell or refinance the home you purchased using a VA loan

To learn more about PenFed VA loans:

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