A VA loan is a mortgage guaranteed by the Department of Veterans Affairs.Published Sept. 2, 2023 8:00 am ETOf the many varieties of mortgage loans out there, the VA loan—a type of mortgage backed by the Department of Veterans Affairs—just might be the one with the most advantages. There’s no down payment required or mortgage insurance premium to pay. Plus, VA lenders are more flexible than conventional lenders when it comes to credit scores and loan limits, too.
Because of this added protection from the government, lenders can be more lenient on credit score and down payment requirements when making these loans and lend out larger amounts. These VA loans are issued directly by the VA and offer some of the lowest rates around. Currently, interest rates for NADLs issued after March 13, 2023, start at just 2.5%. For reference, the average rate on 30-year conventional loans is currently 7.23%.The VA’s IRRRL program is often referred to as a “streamline refinance,” as it’s designed to make refinancing quick and easy for existing VA borrowers.
There may be cases when borrowers want to make down payments anyway, pros say. If you have extra cash and want a lower monthly payment or to reduce your long-term interest costs, for example, you may want to put some money down. You can also lower your funding fee by making a down payment. As Whitehead explains, “It’s a sliding scale. The more down payment, the lower the VA funding fee.”Most VA borrowers pay a funding fee—a one-time charge that’s designed to keep the VA loan program afloat.
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