VA Loan Mortgage Insurance: What Do You Need to Know?

Real Estate
Latest posts by Matt Murphy (see all)

Being a homeowner–from buying your first home to looking for an investment–is a great accomplishment. But of course it’s one that often requires some financial assistance. 

If you’re an active-duty service member, a military veteran, or a military spouse that wants to become a homeowner without the financial strain, VA Loans are a great option. But what about VA Loan Mortgage insurance? Doesn’t it make things expensive?

Actually…there’s no such thing! At Hero Loan, our goal is to make the entire VA Loan process approachable–not confusing–so let’s review. 

What is VA Mortgage Insurance?

So, there’s really no such thing as VA mortgage insurance. One of the benefits of VA loans is that they do not require monthly mortgage insurance payments (as well as down payments, high credit scores, etc.).

Mortgage insurance is insurance payments made on a mortgage if you put less than 20% down. It’s helpful in the sense that mortgage insurance lowers the risk to the lender of making a loan to you, so you can qualify for a loan that you might not otherwise be able to get. But, it also increases the cost of your loan, so you might have higher monthly payments, higher closing costs, or both.

But for mortgage insurance for VA Loans? There isn’t any! 

Do VA Loans have a monthly PMI?

Similarly, VA Loans do not have a monthly PMI (Private Mortgage Insurance). Similar to standard mortgage insurance, PMI is mortgage insurance that is put together by the lender and provided by private insurance companies.

PMIs are often paid through a monthly premium by those who put less than 20% down, or by those who refinanced their home and had got less than 20% of the equity back. 

VA Mortgage Insurance vs. Standard Mortgage Insurance

When you’re issued with a mortgage, the lender typically requires a down payment or a monthly mortgage insurance payment. For loans not provided by the government, the mortgage insurance is called Private Mortgage Insurance (PMI). So it will result in you paying a mix of loan interest, principal, and a monthly insurance fee to the lender.

Because VA Loans are backed or guaranteed by the Department of Veterans Affairs, making homeownership more accessible and affordable for veterans and qualified applicants. That is why they come with little to no down payment requirements and why there aren’t monthly mortgage insurance fees.

VA Funding Fee vs. PMI

While VA Loans don’t require mortgage insurance or PMI, but VA Loan qualified applicants do have to pay a funding fee–VA’s version of a standard mortgage insurance. The VA funding fee, a percentage of your loan amount, is due up-front at the closing of your home loan. The percentage owed will be contingent on your circumstances, but there is always an option to refinance it into your mortgage loan to pay it over time. 

The VA funding fees are to help the program remain self-sustaining and continue to provide the incredible benefits to VA applicants that include no down payments and competitive mortgage rates. 

While these one-time fees might feel expensive, they overall end up being a lot less expensive than the total of monthly mortgage insurance payments. 

So while the standard route of home loans include the loan interest, loan principal, a down payment or a Private Mortgage Insurance monthly payment, a VA Loan only requires an upfront funding fee that could be refinanced if need be or waived for some qualified veterans.

VA Loan Requirements

VA Loans provide for veterans from all branches of the military such as:

  1. Army
  2. Navy
  3. Air Force
  4. Marines
  5. Coast Guard
  6. National Oceanic Atmospheric Administration (NOAA)
  7. Public Health Service (USPHS)

These loans are also available to spouses who have been left in the wake of a service member who has died while serving or from a service-related disability.

There are different types of VA Loans to aid veterans in homeownership: 

  1. Home Loan – A home loan can be used to purchase a home or a condominium, or if you’d like, even start construction of a new home.
  2. Cash-out Refinance – Cash-out refinance replaces your mortgage with a new loan so that you can pay off debts or make home improvements. In addition to that, it can replace a non-VA home loan with a VA home loan.
  3. Interest Rate Reduction Refinance Loan – This VA Loan can also be used to refinance and provides rate reduction by switching out a current VA Loan with a lower interest rate or switching from an adjustable rate to a fixed interest rate.
  4. Native American Direct Loan Program – This particular VA Loan aids Native American veterans with homeownership, home renovation, or home refinancing on federal trust land.
  5. Adapted Housing Grants – This loan is for veterans with service-related disabilities, to aid them in purchase, construction, or modification of a home suitable to their needs.

VA Loans are offered by many private companies with these simple VA Loan requirements, you are eligible for the program if you meet one or two of these criteria:

  1. 90-consecutive days of active service during wartime
  2. 181-days of active service during peacetime
  3. 6-years or more of service in the National Guard or Reserves
  4. Spousal relation to a service member who died in the line of duty (or as a result of a service-induced disability)

If you think you meet these criteria, you can move onto acquiring a Certificate of Eligibility (COE), the certificate will be proof of a veteran’s total time of service and of the branch you are in.

Benefits of VA Loans

A VA Loan is commonly considered by lenders as less risky than conventional loans, and the benefits that come with a VA Loan never expires. VA Loans require no minimum credit score, down payment, or mortgage insurance.

And, there is no need to worry about the one-off VA funding fee, since there is the choice of refinancing it into your VA Loan or even getting it waived depending on the loan recipient. 

VA Loan Mortgage Insurance Calculator

While people are looking for VA mortgage insurance calculators, there’s no need because there isn’t any VA mortgage insurance! But, we have many other calculators you can use to help determine VA loan limits, affordability, mortgage payments, and more.

  1. VA Loan Calculator 
  2. Funding Fee Calculator
  3. VA Loan Limit Calculator
  4. VA Affordability Calculator
  5. VA Refinance Calculator
  6. VA Mortgage Payment Calculator

Another option? Reach out to our team at Hero Loan so we can do all this for you.

Bottom Line: No VA Mortgage Insurance Payments is a Great Benefit of VA Loans

We’re happy to let our veterans and military families know there is no VA mortgage insurance and no PMI. VA Loans allow those that served our country to purchase their home without the financial stress of conventional loans. 

Of course, determining your eligibility for a VA Home Loan and discerning between all of your options can feel like a lot of effort on your own–but it doesn’t have to be. Hero Loan has an expert team committed to help you every step of the way.At Hero Loan, we’ll walk you through the VA Loan process from start to finish, guiding you through the VA Loan requirements, the Certificate of Eligibility, and the rest of the paperwork so you can close in as soon as 14 days. And you can get started on a quick and easy loan application today!