Understanding VA loans

​VA loans are desirable because they do not always require a down payment and they do not require mortgage insurance.  FHA and conventional loans with less than a 20 percent down payment require mortgage insurance. The benefit translates into significant monthly savings for VA borrowers. For instance, a borrower who makes a 3.5 percent down payment on a $200,000 FHA-insured mortgage pays $100 a month for mortgage insurance alone.

So who is eligible for a VA loan?  Military Veterans, active military members, honorable discharged members, and spouses of military members who died while on active duty.

Although the costs of getting a VA loan are generally lower than for other types of low-down-payment mortgages, they still carry a one-time funding fee that varies, depending on the amount of the down payment and the type of Veteran.  A borrower in the armed forces getting a VA loan for the first time, with zero down payment, would pay a fee of 2.15 percent of the loan amount. The fee is reduced to 1.25 percent of the loan amount if the borrower makes a down payment of 10 percent or more.  Those using the VA loan program for the second time, without a down payment, would pay 3.3 percent of the total loan amount.

A VA loan can only be used to purchase your primary residence.