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Veterans can save on mortgages with a VA home loan

Active and retired service members can often get a great deal on a mortgage with a loan guaranteed by the Department of Veterans Affairs.

The VA doesn’t make loans, but it guarantees them for lenders, and in return lenders offer better terms on the loans. Not all lenders offer VA-backed loans, so it’s worth looking around for one that does.

The biggest advantages for borrowers are (1) no down payment in most cases, (2) no private mortgage insurance, and (3) frequently, lower rates.

Loans without a down payment are available in most of the country for loan amounts up to $417,000. In certain high-cost areas, the limit can go up to $625,500 (or even more in a few places).

For loans above the limit, the down payment is typically 25% of the excess. So if the limit is $417,000 and a veteran borrows $457,000, the excess would be $40,000, and the veteran’s down payment would be $10,000.

Most borrowers who put up a down payment of less than 20% have to buy private mortgage insurance, but this insurance is waived under the VA program. On a $250,000 loan, that can save a typical borrower almost $200 a month.

Also, because the VA is guaranteeing the loan, lenders frequently offer rates that are 0.5% to 1% lower than conventional rates.

VA loan qualification rules are often more forgiving those for other mortgages, and there is no minimum credit score to qualify. There is also no prepayment penalty.

VA loans must be used for a primary residence (not a vacation home), and the property must be in the U.S. However, a loan can be used not just for an initial purchase but also for repairs and improvements or to refinance an existing mortgage. You can also use a VA loan to buy a multi-family property of up to four units, as long as you occupy one of the units.

There are some limits on eligibility for members of the National Guard and Reserves, and there are other limitations if you have already used a VA loan to buy a home in the past.

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