The VA doesn’t make actual loans, nor does it set interest rates. Instead, it partially guarantees loans and refinancing through private lenders such as banks, credit unions and mortgage companies.  This guarantee encourages lenders to offer borrowers better terms than conventional loans, such as:

1. No Down Payment:Most home mortgage programs require at least a small down payment ranging from 3% to 20% or more of the home’s purchase price. VA Home Mortgages allow borrowers to finance 100% of the price of the home. The VA also limits the closing costs lenders can charge to VA borrowers.

2. Flexible Loan Limits: Unless borrowers are putting no money down, there are generally no loan limits. The VA loan limit for 100% financing, however, is $510,400 in most markets in 2020. But there are exceptions! In more expensive “high-cost” counties, the limits are higher. 

3. No Mortgage Insurance Premiums :Most lenders will require you to pay some form of mortgage insurance premium if you make a down payment under 20%, including for FHA loans. A VA loan requires no mortgage insurance of any kind, making these mortgages very affordable. There may be a special “funding fee” at closing, which can be added to the loan amount. They range from 1.25% to 3.60% of the loan amount, depending on various factors, but are usually waived for veterans with service-related disabilities. If a veteran is receiving any VA disablity rating the funding fee is waived.

4. No Prepayment Penalties: With a VA mortgage, borrowers can sell their homes at any time without restrictions or fees. Borrowers are also free to refinance their existing VA loans into lower interest rate VA loans or non-VA loans.