A VA loan is a mortgage loan that is insured by the United States Department of Veterans Affairs to help veterans and their families obtain up 100% home financing without paying monthly mortgage insurance. Similarly to FHA loans, VA loans are backed by Ginnie Mae of GNMA. In lieu of monthly mortgage insurance charges, VA charges a Funding Fee, which can be financed on top of the purchase price of the home or be paid in cash. VA Funding Fee charges vary, based on prior use of VA loans, by the veteran, the branch/type of service and whether or not the veteran is exempt. The Department of Veterans Affairs does not directly originate VA loans, but it establishes the rules for those who may qualify, sets the terms of the mortgages offered and insures VA loans against default. To qualify for a VA loan, borrowers must present a certificate of eligibility, which establishes a record of military service, to the lender. VA does allow the seller to pay a substantial amount of the buyer’s closing costs and prepaids, which can be up to 4% or the home purchase price.
