Private mortgage insurance (PMI) can be a hurdle for your family to close on your dream home. Ranging from .5 to 1 percent of the loan, you can pay thousands extra while owning the property.
Overall, you can feel completely out of reach buying a home because of PMI, especially if you’re an active-duty service member or veteran.
The great news is that the Department of Veterans Affairs (VA) makes it easier by paying for mortgage insurance in full.
We want to tell you more about how the VA Loan handles PMI so you can have confidence in moving forward on an affordable loan option.
Does the VA Home Loan Require PMI?
Unlike other loan types, the VA Loan Program don’t ask you to pay anything on private mortgage insurance.
The government fits the bill so more families like yours can move into the home they’ve always wanted and get rewarded for years of military service.
You’ll often come up against PMI at closing as an upfront cost or in mortgage payments over the loan (like with an FHA loan).
In addition, streamline refinances, VA Cash Out Refinances, and other forms of refinance on the VA Loan won’t incur PMI.
An experienced loan officer can help you apply for an affordable loan that doesn’t charge for PMI, saving you thousands.
What about the VA Funding Fee?
The VA Funding Fee is a closing cost unique to VA home buyers. And it’s actually more expensive than PMI on the front end, confusing many veterans.
How am I saving money on private mortgage insurance when the VA charges me the funding fee?
As experienced lenders, we’ve calculated the savings for military service members with the VA Loan. It’s proven time and time again that they save thousands over the life of the loan by paying the initial closing cost.
It may run you up to 3% of the loan amount but it also eliminates monthly payments and PMI.
How does the VA Funding Fee Work?
Unlike private mortgage insurance, the VA Funding Fee supports military families in case of default and protects them in precarious situations.
The breadwinner may pass away, leaving a surviving spouse of a veteran with a lofty mortgage they can’t pay. In these circumstances, the VA pulls money from all the VA Funding Fees they collect and gives it to her.
VA Funding Fees are more than just insurance on your home: it’s a cycle of service and support to all veterans and active-duty personnel. Since the VA guarantees 25% of your home with the VA Loan, you have government backing in case of default.
As a result, you won’t need PMI and your monthly interest rate drops.
VA Funding Fee vs. PMI
The differences between the VA Funding Fee and PMI prove the affordability of a VA Mortgage Loan. You can purchase the home your family has always wanted for zero money down and not pay anything to protect your home from foreclosure.
| VA Funding Fee | PMI |
|---|---|
| VA guarantees 25% of loan | 3rd party company covers home |
| Waived for disabilities | Required for all home buyers |
| Covers default for other military families | Insures your home in case of default |
| Paid upfront; no monthly payments 0% to 3% of the loan amount | Pay upfront or monthly payments .5% to 1% of the loan amount |
VA Loan Rates are Lower than Conventional Loans
Our lenders have worked with VA Loan and conventional loan clients and found that veterans and active-duty service members always get cheaper rates.
Ellie Mae even says that VA Loans get a loan rate of .25% less than conventional loans. Again, the VA backs the home loan, so the lender is more comfortable cutting you a deal on the life of the loan.
The VA wants to take care of you by providing you with the cheapest home loan on the market. An experienced lender can help you get started today.
How to apply for a VA Loan
To apply for a VA Loan, you’ll need to fill out a loan application. A VA-approved lender reviews your current financial picture, military documents, and other qualifications to see if you’re eligible.
A general requirement the VA sets for the VA Home Loan is to service in one of the following armed services:
- Active-Duty Service Member
- Veteran
- Current National Guard or Reserve Member
- Discharged National Guard Member
- Discharged Reserve Member
- Surviving Unmarried Spouse of a Service Member
Then, a military lender checks your Certificate of Eligibility (COE) to ensure you were honorably discharged from serving this Great Country. You must also have met certain qualifications for the length of service, including:
- 181 days of active duty service during peacetime
- 90 days of active duty service during wartime
- 6 years of service with the National Guard or Reserves
Or - 90 days with National Guard or Reserves under Title 32 with at least 30 consecutive active days
- Surviving spouse of a service member who died in the line of duty or who suffers a service-connected disability
Get Rewarded with No PMI on Your Home
As a service member of the United States, you deserve special honor and recognition for the sacrifice you’ve given.
The VA does this by partnering with military lenders to offer the VA Home Loan. It’s has the lowest mortgage rates on the market without high credit score requirements. You won’t have to pay PMI or a down payment for the loan balance too.
We recommend reaching out today and working with a personalized VA lender. They personally care for those that have served this Great Country and want to serve you by taking you through the VA Loan Journey.
Take your first steps toward homeownership with zero PMI by calling (602)-908-5849.
