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If you served in the military at any time in your life and now are ready to purchase a home, you should look into getting a VA loan. A VA loan is a mortgage issued by the United States Department of Veterans Affairs, and anyone who has served in the military can apply for one. Before you contact a lender, you should understand several things about VA loans.

The Terms of a VA Loan

Of all the mortgage programs available, people will often choose VA loans over other types if they are eligible, and this is because VA loans offer great terms. One key feature offered through VA loans is the qualification standards. While you must prove you were in the military or still are, there are very few other qualification standards to meet. This makes it relatively easy to get approved for a VA loan.

Secondly, people who qualify for VA loans often choose these loans because they do not require down payments. It is very hard to find a loan program today that does not require at least a small down payment. There are times, however, that some applicants will need down payments, but there are also many occasions when people get VA loans with 0% down.

You should also understand that the interest rates offered on VA loans are usually very competitive, and this is because the risk the lender assumes is lower than the risk on other types of loans. VA loans are backed by the government. If a borrower defaults, the government will pay off the loan, which means the lender has no risk involved with the transaction.

Finally, you will not have to pay private mortgage insurance (PMI) with a VA loan. PMI is a normal requirement for other loan types, and it is required when people borrow more than 80% of a home's value. With a VA loan, you might be able to borrow 100% of the value of the home without paying a dime of PMI. This is a huge benefit, simply because PMI only protects the lender, not the borrower.

The Fees of VA Loans

When you close on a house with a VA loan, you will have to pay fees. Many of the fees are the same types as you would have if you bought a house with a different type of loan, but there is one additional fee you will have with a VA loan that is not found with other loan types. This fee is called a funding fee.

The funding fee you pay with a VA loan is designed to help the VA continue its operations, and the amount of the fee varies. It is typically calculated by determining how much of a home's value you borrowed in terms of a percentage. The funding fee will be higher if you borrow 100% of the home's value, and it will be lower if you borrow only 70% or 80% of a home's value.

For example, if you borrow 95% of the home's value, you may pay between 2.15% to 3.3% for the funding fee. This fee is calculated annually, and you will continue paying the fee for as long as you have the loan. If you borrow less than 90% of the home's value, your funding fee might only be 1.25% to 1.5% of the amount you borrow. Because of this, you may want to try to put some money down on the house you purchase. Doing so will help you save money on your funding fees.

If you are ready to learn more about mortgages and home loans, talk to a lender today.