How The VA Loan Works
VA home loan is a mortgage made by a private lender (bank/mortgage company/credit union) that’s backed by the U.S. Department of Veterans Affairs (VA). The VA doesn’t lend the money directly. It provides a loan guaranty that reduces the lender’s risk, which is why VA loans often come with flexible terms for eligible Veterans, active-duty service members, and Eligible surviving spouses.
VA Loan Entitlement
Entitlement is your available VA benefit, the amount of guaranty the VA can provide on your behalf. Your Certificate of Eligibility (COE) shows whether you have entitlement available and how much (if any) has been used before.
How Entitlement is Restored is Restored
1. Sell the home and the VA loan is paid in full (most common)
2. Refinance out of the VA loan into a non-VA loan (VA loan paid off)
3. A qualified veteran assumes your VA loan and substitutes their entitlement (so yours is freed up)
4. One-time restoration: you pay off the VA loan but keep the home (allowed once)
VA Funding Fee
1. The VA funding fee is a one-time charge on most VA loans that helps keep the VA home loan program running (so it can offer benefits like $0 down and no monthly mortgage insurance).
2. It’s calculated as a percentage of the loan amount (not the home price).
3. The percentage depends on things like first-time vs. repeat use, down payment amount, and loan type.
4. You can often finance it into the loan (roll it in) instead of paying it out of pocket at closing.
5. Some borrowers are exempt, commonly certain Veterans receiving VA disability compensation (and other eligible categories).
If you’re not exempt, another party can pay it (seller, lender, or even a family gift), depending on how your deal is structured.
VA Funding Fee Calculator
See your exact VA funding fee percentage and dollar amount based on your component, loan type, down payment, and disability status.
Component
Loan Type
Use Type
First Use 2.15% × $400,000
VA Funding Fee
$8,600
Have a Question About Your Scenario?
This calculator provides an estimate only, based on the VA funding fee schedule effective April 7, 2023. Funding fee rates are set by the VA and subject to change. Exemption eligibility depends on your individual disability compensation status and is determined by the VA, not this calculator. Contact Bryce Pierce for a personalized review of your scenario.
Key Benefits of The Va loan
NO down payment requirement
VA loans offers service members the ability to finance up to 100% of the purchase price of a home. Other loan types such as conventional and FHA loans may require a minimum down payment.
NO monthly mortgage insurance (PMI)
VA loan does NOT require monthly mortgage insurance which is an extra monthly fee that usually comes with a conventional loan when you put less than 20% down. It protects the lender in case the borrower stops making payments. VA loans often have lower monthly payments compared to other loan types due to this.
Competitive Interest rates
Because the VA guarantees a portion of the loan, VA loans often come with more competitive (sometimes lower) interest rates than comparable conventional or FHA financing.
Lifetime benefit (use it more than once)
Your VA home loan benefit can be used multiple times over your lifetime (as long as you have sufficient entitlement).
Assumable mortgage
VA loans are generally assumable meaning a future buyer may be able to take over your existing VA loan (including the rate) if they qualify and the servicer approves the assumption. This can be a big resale advantage in a high-rate market.
No prepayment penalty
VA borrowers have the right to pay off the loan early without a prepayment penalty.
Allows up to 4% in sellers concessions on top of seller paid closing costs
Thank you for choosing us. We are dedicated to helping you achieve your homeownership goals with personalized service and expert guidance. For more information or assistance, feel free to reach out to us anytime!
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Your VA Loan Advisor
Bryce Pierce
