Do VA Loans Require Mortgage Insurance?

Priority Lending LLC, the most trustworthy mortgage lenders in Tucson, AZ, offers reliable loans for anyone looking to buy a house. If you’re a former or active military member, you can also apply for a VA loan.

VA loans are similar to traditional ones but have a few critical differences that are vital to know before applying. Many first-time applicants have questions like, “Do VA loans require mortgage insurance?” and, “Are there credit score requirements for VA loans?” We’ll answer all of those and more in the sections below. 

VA Loan Requirements

The VA has stricter eligibility requirements than conventional loans, but mortgage insurance isn’t one of them. The VA bans its loan lenders from collecting private mortgage insurance from their borrowers. Even though you can skip enrolling with a private mortgage company, you will have to meet several unique criteria before receiving a VA loan.

For starters, the VA requires their loan recipients to either be active military members or military veterans who fulfilled their duties and received an honorable discharge. On top of that, you need at least 90 days of uninterrupted military service during wartime or 181 consecutive service days during peacetime in your active military days.

You are also eligible for a VA loan if you put at least six years of service into the National Guard. You might also qualify if you had a military spouse who passed away during active duty. 

How the VA Replaces Mortgage Payments

So, do VA loans require mortgage insurance? Not technically, but just because VA loan programs don’t accept official mortgage payments doesn’t mean their loans aren’t insured.

The VA covers insurance costs, not through mortgage payments, but with a funding fee. Most providers issue funding fees at closing, and the average rate is 2% to 3% of your original loan balance. However, funding fees aren’t concrete, and yours might be higher or lower depending on your credit score.

The VA does waive funding fees for some qualifying borrowers. For example, a borrower whose military spouse died in active service or those entitled to disability compensation can receive loans without funding fees. People with high credit scores over 700 also receive occasional $0 funding fee loans, but those instances are uncommon.

Non-Service Requirements for VA Loans

Credit Score

While the VA doesn’t require an official credit score minimum, most lenders won’t approve anyone with a FICO credit score below 620. In addition, lenders will likely reject your application if you have any outstanding debts.

Income 

Beyond good credit, lenders want you to prove that you have the necessary revenue to receive a loan. Many will ask for years worth of tax documents and pay stubs when you apply, and some require that you make a down payment worth 20% of the loan.

Apply For a Mortgage Loan Today

Hopefully, we answered the question, “Do VA loans require mortgage insurance?” and prepared you to take the next step in your home-buying journey. 

If you’re ready to apply for a loan or learn about the kinds of home loans available, call Priority Lending LLC today at (520) 231-1413.

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