VA Home Loan Types

Department of Veteran Affairs offers VA home loan programs to help you buy, build, or improve a home or refinance your current home loan through VA-backed loans.

With a VA-backed home loan, VA guarantees (or stands behind) a portion of the loan you get from a private lender. If your VA-backed home loan goes into foreclosure, the guaranty allows the lender to recover some or all of their losses. Since there’s less risk for the lender, they’re more likely to give you the loan under better terms. In fact, nearly 90% of all VA-backed home loans are made without a down payment.

Why might You want a VA-backed purchase loan?

A VA-backed purchase loan often offers:

  • No down payment as long as the sales price isn’t higher than the home’s appraised value (the value set for the home after an expert reviews the property)
  • Better terms and interest rates than other loans from private banks, mortgage companies, or credit unions (also called lenders)
  • The ability to borrow up to the FannieMae/FreddieMac conforming loan limit on a no-down-payment loan in most areas—and more in some high-cost counties. You can borrow more than this amount if you want to make a down payment.
  • No need for private mortgage insurance (PMI) or mortgage insurance premiums (MIP)
    • PMI is a type of insurance that protects the lender if you end up not being able to pay your mortgage. It’s usually required on conventional loans if you make a down payment of less than 20% of the total mortgage amount.
    • MIP is what the Federal Housing Administration (FHA) requires you to pay to self-insure an FHA loan against future loss.
  • Fewer closing costs, which may be paid by the seller
  • No penalty fee if you pay the loan off early

Lenders follow VA standards when making VA-backed home loans. They may also require you to meet additional standards before giving you a loan. These standards may include having a high enough credit score or getting an updated home appraisal (an expert’s estimate of the value of your home).

Lenders offer competitive interest rates on VA-backed purchase loans. This can help you buy, build, or improve a home—especially if you don’t want to make a down payment.

Go to Vets.gov to apply for a Certificate of Eligibility, the first step in applying for a VA-backed loan.

If you have any additional questions, please feel free to contact Montgomery County Veterans Service at 936-539-7842 or via email at vetsvc@mctx.org.