A VA loan is a mortgage loan program available to eligible veterans, active-duty service members, and surviving spouses of veterans which makes them particularly popular in San Diego County and across California. It is guaranteed by the U.S. Department of Veterans Affairs (VA) and is designed to help veterans and their families become homeowners by offering favorable terms and benefits.
Here are the key features of a VA loan:
- VA Guaranty: VA loans are backed by the VA, which means that the VA guarantees a portion of the loan amount to the lender. This guarantee reduces the risk for lenders, allowing them to offer more favorable terms to borrowers.
- No Down Payment: One of the significant benefits of a VA loan is that eligible borrowers can purchase a home with no down payment. This can make homeownership more accessible, particularly for borrowers who may have difficulty saving for a down payment.
- No Private Mortgage Insurance (PMI): Unlike conventional loans, VA loans do not require borrowers to pay private mortgage insurance (PMI). This can lead to significant savings over time, as PMI is typically required for borrowers who make a down payment of less than 20% on a conventional loan.
- Flexible Credit Requirements: VA loans have more flexible credit requirements compared to conventional loans. The VA does not set a specific minimum credit score requirement, but lenders may have their own credit score criteria. Borrowers with less-than-perfect credit may still be eligible for a VA loan if they meet other criteria and demonstrate the ability to repay the loan.
- Competitive Interest Rates: VA loans often come with competitive interest rates, which can result in lower monthly mortgage payments compared to other loan programs.
- Funding Fee: While VA loans do not require a down payment or PMI, borrowers are generally required to pay a one-time funding fee to the VA. The funding fee helps offset the cost of the VA loan program and varies depending on factors such as the borrower’s military category, down payment (if any), and whether it is the borrower’s first or subsequent use of the VA loan benefit.
- Occupancy Requirement: VA loans require borrowers to intend to occupy the home as their primary residence. They are not typically available for investment properties or vacation homes.