What is a VA loan?

A VA loan is where the U.S. Department of Veterans Affairs guarantees the repayment of the mortgage on behalf of the borrower. VA loans were intended to be a home loan program that gave veterans the opportunity to purchase homes with little to no down payment and where private financing was not available.

The VA loan does not require mortgage insurance even though the note can be financed up to 100% of the purchase price. Most commonly, VA loans do not have a second mortgage.

An advantage of VA loans is that because there is no mortgage insurance, the borrower has more leverage to borrower additional funds; basically finance a more expensive home.

While VA loans allow borrowers the entire purchase price into the loan, borrowers can only borrow up to 90% in a refinance. Fannie Mae and Freddie Mac will allow VA loans to be conforming and non-conforming because they are insured by the Department of Veterans Affairs.