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If you're an active member or veteran of the U.S. military, or the spouse of a former military member who died in the line of duty, you may be eligible for a VA loan. VA loans generally require no money down, and they can be a good mortgage for borrowers with poor credit. Here's an overview of today's VA loan rates.
A VA loan is a mortgage that's backed by the U.S. Department of Veterans Affairs. The benefit of getting a VA loan is not having to put money down toward the purchase of your new home. Also, there's technically no minimum credit score requirement for getting a VA loan, though individual mortgage lenders may set their own thresholds.
Unlike conventional loans, VA loans don't impose private mortgage insurance -- a premium borrowers must usually pay when their down payment is less than 20%. That said, VA loans do come with closing costs and a funding fee, which varies depending on whether you're able to make a down payment and whether this is your first VA loan application.
As with conventional mortgages, your closing costs with a VA loan will generally fall between 2% and 5% of your loan amount. Your funding fee, meanwhile, will depend on whether this is your first VA loan and whether you’re making a down payment or not. For your first VA loan, you'll pay a 2.3% funding fee. For subsequent applications, you're looking at a 3.6% fee. But if you're able to make a down payment of 5% but less than 10%, your funding fee will be 1.65%, whether or not this is your first VA or loan. For a down payment of 10% or more, your funding fee will be 1.40% for a first or subsequent application.
Shopping around with different VA lenders is the best way to snag the most competitive loan rate you might qualify for. You can apply online for multiple VA loans at once, and doing so within the same 30-day period is better for your credit score than spreading your search out. (Each time you apply for a loan, it results in a hard inquiry on your credit record that can cause a slight drop to your score, but multiple hard inquiries for the same purpose in a short time frame generally count as a single inquiry.) Many lenders who offer conventional loans offer VA loans as well.
When shopping around for a VA loan, keep the following items in mind:
A VA loan could make it possible for you to buy a home with no down payment. If you can afford your monthly mortgage payment but simply lack the savings for a down payment, it makes sense to apply for a VA loan and see what rates you qualify for. Further, the funding fee that applies to VA loans can be rolled into your mortgage so you pay it off over time, rather than up front. You may also have the option to roll your closing costs into your loan so that if you're short on funds right now, you can still buy a home.
That said, there are risks in buying a home with no money down -- namely, that it could take a while to build equity in that property. And if your home value drops after you buy it, you could wind up owing more on your home loan than your house is worth.
One thing you should know is that you can't get a VA loan to purchase a vacation home or income property; your loan must be used to buy a primary residence. But you can apply for a VA loan for a primary home more than once, and doing so could be a good way to secure the financing you need.
A VA loan is a mortgage that's backed by the U.S. Department of Veterans Affairs.
Shopping around with different VA lenders is the best way to find the most competitive loan rate you might qualify for.
A VA loan may be a good option if:
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