A VA loan is perhaps the most powerful and flexible lending option on the market today. Rather than issue loans, the VA instead pledges to repay about a quarter of every loan it guarantees in the unlikely event the borrower defaults. That guarantee gives VA-approved lenders greater protection when lending to military borrowers and often leads to highly competitive rates and terms for qualified veterans.
Benefits of VA LoansFar and away, the most significant benefit of a VA loan is the borrower's ability to purchase with no money down. Apart from the government's USDA's Rural Development home loan and Fannie Mae's Home Path, it's all but impossible to find a lending option today that provides borrowers with 100 percent financing.
VA loans have less stringent underwriting standards and requirements than conventional loans. In fact, about 80% of VA borrowers could not have qualified for a conventional loan. These loans also do not require Private Mortgage Insurance (PMI), which is an additional monthly expense that is required on loans where the down payment is less than 20%.
VA loans offer a few other bells and whistles:
Competitive interest rates that are routinely lower than conventional rates
No prepayment penalties
Higher allowable debt-to-income ratios than for many other loans
Streamlined refinancing loans that require no additional underwriting