Which of the following is a key benefit of a VA loan that distinguishes it from a conventional loan?
Correct Answer
A) No down payment required and no private mortgage insurance
VA loans are backed by a government guaranty through the Department of Veterans Affairs, which eliminates the lender's risk of default loss. Because of this guaranty, lenders do not require a down payment, and the VA guaranty substitutes for the private mortgage insurance (PMI) that conventional lenders require when a borrower puts down less than 20%. These two benefits — $0 down and no PMI — are the defining advantages of VA financing.
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Related Topics & Key Terms
Key Terms:
Related Concepts
The secondary mortgage market is where existing mortgage loans are bought and sold between lenders, investors, and government-sponsored enterprises (GSEs) like Fannie Mae, Freddie Mac, and Ginnie Mae.
TILA is a federal law that requires lenders to disclose the true cost of credit to borrowers, including the annual percentage rate (APR), total finance charges, and loan terms. It is implemented by Regulation Z.
A trustee sale is a type of foreclosure where a trustee, appointed under a deed of trust, sells the property at auction to satisfy the debt.
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