Veterans Affairs (VA) Mortgages

Our country is indebted to veterans of the armed forces, and VA mortgages are one way we can help reward them for their contributions. Guaranteed by the Veterans Administration, these loans have helped countless Americans who served in the armed forces enjoy home ownership.

Veterans of the armed forces have courageously defended America throughout our history. It's only natural, then, that VA mortgages, guaranteed by the Veterans Administration and issued by qualified lenders, give them the opportunity to enjoy the American Dream. Here's how they work:

Financing without PMI

Veterans are allowed 100 percent financing on a home without having to pay private mortgage insurance (PMI). This offer is extended to American veterans or their surviving spouses, providing that they do not remarry. These loans also include extremely competitive rates.

No closing costs, streamlined refinance

To receive a VA mortgage, veterans are required to pay a funding fee of 0 to 3.3 percent of the loan, which can be rolled into the mortgage. This fee replaces traditional closing costs, which can typically run from 3 to 5 percent of a loan's value. Another benefit for veterans is the VA mortgage's streamlined refinance: Veterans are allowed to refinance their current loans to a lower rate without having to re-qualify. As a result, they can bypass income verification, income documentation, and home appraisals.

Lending choices

VA mortgages do have some restrictions when compared to general mortgages in the marketplace. For instance, they don't include "no document" or "no income verification" loans, or interest-only loans and home equity lines of credit (HELOCs). What's more, candidates are not allowed to receive cash back at closing on a new home purchase.

VA mortgages do offer a cash-out refinance option, in which veterans may borrow up to 90 percent of the value of the home. And even though HELOCs aren't available, home equity loans are. These allow borrowers to tap up to 100 percent of their home's equity.

Credit history

During the qualification process, most lenders only consider the last 12 months of a veteran's credit history. However, applicants should be mindful of the fact that bankruptcies, tax liens, and collections could have a negative impact on the qualifying process.

Maximum amount

The highest mortgage that a lender will allow for the 100 percent financing option is $417,000. If you want to purchase a more expensive house, the difference between the purchase price and the $417,000 would need to be brought to the closing table as a down payment.

Protection for lenders

VA mortgages offer the kind of benefits that would make most lenders wince, which is why the Veterans Administration guarantees the loans in the event the borrower defaults. They have become a viable lending option for active military personnel and veterans. With 100 percent financing and affordable rates, they're a small token of our nation's appreciation. And it's making home ownership easier for veterans from sea to shining sea.