ADVANTAGE: LOAN GUARANTY

One of the most appealing features of the VA 

home loan program is that you aren’t required to 

make a cash down payment, which, with other 

loans, can be as much as 20% of the purchase 

price. This means you can borrow 100% of the 

value of the home plus the customary VA funding 

fee of 2.15% for first-time borrowers. (The fee is 

reduced if you make a down payment and may be 

waived if you are a disabled veteran.) 

There are good reasons to make a down 

payment, if you can. Most important is that in 

reducing the amount you borrow, you reduce 

your borrowing costs and spend less on housing. 

Making a down payment may also reduce the loan 

you need to less than the amount the VA will  

guarantee in the area where you’re buying.

Another plus with a VA guaranty is that you 

don’t need private mortgage insurance (PMI), 

which is normally required if you make a down 

payment of less than 20%. In addition, you can 

always prepay a loan with a VA guaranty without 

penalty, and the loan itself may be assumable, 

which means that it can be transferred to a new 

owner. One caution, however: Be sure to have  

the assumption approved by the VA.

While a VA loan guaranty does not protect you 

against foreclosure if you can’t make your pay-

ments, the VA does offer financial counseling to 

help you avoid losing your home if you’re having 

financial problems. If you’re having trouble 

paying, you can also logon to www.cfpb.gov/

mortgagehelp or call 855-411-2372.

MONEY MATTERS

Before you begin to search actively for  

a home, it’s important to anticipate some  

of the added costs of buying.

 You should pay for an inspection of the  

property before you sign a contract with  

the seller. Armed with information about 

potential structural and other problems, you 

may be able to negotiate a lower price. You 

should also hire an attorney to represent  

you in the buying process.

In addition, you’ll need enough cash on 

hand when the purchase is finalized to pay  

the balance of your down payment, if you’re 

making one, and other closing costs. Although 

a VA guaranty does limit closing costs, you may 

owe more than the national average of 2% of 

the loan amount if you’re buying in an area 

with high local real estate taxes.

REFINANCING A LOAN

If you use the VA home loan program to  

refinance an existing mortgage to reduce 

the interest rate you’re paying, your credit 

isn’t rechecked and the only certification 

you’re required to make is that you have 

occupied the property.

WHAT YOU’LL NEED 

 A Certificate of  

Eligibility (COE)

 Good credit

 Enough income for  

mortgage payments  

and other expenses

 Certification of your  

occupancy

 A loan provided by a  

creditable lender

 Money for closing costs

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