HOW DO VA LOANS WORK?
Welcoming Service Members Home
Home loans backed by the Department of Veterans Affairs (VA) provide affordable home financing options for eligible Service Members, Veterans and surviving spouses.
FHA mortgage loans accomplish this through a variety of unique features and advantages, including low to no down payments with lower closing costs than other home loans.
No Private Mortgage Insurance (PMI)
100% Financing with Full VA Entitlement*
No Prepayment Penalties
Fixed- and Adjustable-Rate Mortgage Options
VA Financing Fees That Can Be Lumped Into the Total Loan Amount
A Variety of Eligible Property Types, Including Townhomes and VA-Approved Condos
FAQs About VA Loans
Will I have to pay mortgage insurance with a VA loan?
The short answer is no, you will not. Even if you put no money down, there is no private mortgage insurance (PMI) when you use a VA loan to buy your home. You will instead have to pay a VA funding fee, which you can pay up front at closing or it can be rolled into and financed as part of the total loan amount.
In some cases, the seller may elect to pay or the buyer’s and seller’s real estate agents may negotiate to have the seller cover the VA funding fee.
The funding fee is calculated as a percentage of your loan amount and is based on what, if any, down payment is associated with the loan. It also factors in whether the veteran associated with the loan is a first-time VA mortgage recipient or has used the VA loan option more than once.
Can I roll my VA loan closing costs into the total loan amount?
The VA loan allows eligible borrowers to include SOME closing costs into the total loan amount. As mentioned above, the VA funding fee is one of the VA loan closing costs that you can choose to roll into the total loan amount. The other fees that are lumped into closing costs are not eligible to be rolled into the total loan amount, but you and your agent may be able to negotiate additional seller or lender concessions to bring the upfront cost of the loan down.
What is a Certificate of Eligibility (COE)?
Before you are granted a VA home loan, you must first obtain a valid Certificate of Eligibility (COE). Your COE is based on your length of service or service commitment, duty status and character of service. Veterans, active-duty personnel and eligible surviving spouses can request their COE from the VA, or your Fairway mortgage advisor can look it up when you are ready to apply.
Your COE tells your lender whether you have your “full entitlement” available, which means you can buy a home with zero down, or “partial entitlement,” which means you would have to make a down payment for your home purchase.
What are VA land loans? Can I use a VA loan to buy land?
You can use a VA loan to buy land as long as there is a home on the property. The VA loan rules do not limit the amount of land you can buy, but keep in mind, that similar properties in the area where you purchase must be used for residential purposes only.
For example, if you are thinking of buying a 10-acre plot with a house on it, but all the other 10-acre properties near yours are income-producing farms, you may not be able to use a VA mortgage loan for your purchase. But if you are purchasing in a rural area dotted with similarly sized hobby farms, you would more likely be in the clear.
I have already used a VA loan for my first home loan. Can I get a second VA loan?
Yes. You can take out a VA mortgage even if you have used one before. However, if you haven’t paid off your last VA home loan, you may only have a partial entitlement remaining or no entitlement remaining. You would need to pay off the current loan to restore your full entitlement to avoid loan limits and realize all the other great benefits of the VA mortgage loan on that second loan.
Is a VA construction loan available? Can I use a VA loan to build a home?
It is possible to use a VA loan to build a house, but few lenders offer this option. VA construction loans require buyers to jump through many more hoops to qualify, including finding a VA-approved builder and then making sure the building plans qualify for VA financing.