A veteran with full entitlement is comparing a $400,000 VA loan at 100% financing against an FHA loan with 3.5% down. Does the VA loan require a recurring monthly mortgage-insurance premium at 100% financing?
Correct Answer
A) VA charges no monthly mortgage insurance at 100% financing
A. The VA loan does not require monthly mortgage insurance. VA distinguishes its one-time funding fee from recurring mortgage-insurance premiums. Financing the full purchase amount does not introduce a monthly VA insurance charge. Scope and exceptions: An eligible funding-fee exemption may remove the one-time fee; otherwise it can still apply. Taxes, homeowners insurance, interest and other closing costs remain separate. Full entitlement does not guarantee underwriting approval. Source: About the VA funding fee — https://www.va.gov/housing-assistance/home-loans/funding-fee-and-closing-costs/
Why This Is the Correct Answer
A. The VA loan does not require monthly mortgage insurance. VA distinguishes its one-time funding fee from recurring mortgage-insurance premiums. Financing the full purchase amount does not introduce a monthly VA insurance charge. Scope and exceptions: An eligible funding-fee exemption may remove the one-time fee; otherwise it can still apply. Taxes, homeowners insurance, interest and other closing costs remain separate. Full entitlement does not guarantee underwriting approval.
Why the Other Options Are Wrong
Option B: VA charges monthly insurance for 11 years above 90% LTV
This is not a VA monthly-insurance rule.
Option C: VA charges monthly insurance until the balance reaches 78%
Conventional PMI termination concepts do not create VA monthly insurance.
Option D: VA charges monthly insurance at 0.55% of the loan each year
The proposed recurring percentage is not a VA monthly-insurance charge.
Exam Tip
No VA monthly mortgage insurance does not mean no other borrowing costs.
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