How does a VA loan work?

A VA loan works much like any other mortgage, with advantages. It's a mortgage from a regular lender, like a bank or mortgage company, with part of it guaranteed by the Department of Veterans Affairs. That guarantee is what lets lenders offer terms that are hard to get elsewhere. VA loans don't require private mortgage insurance or a mortgage insurance premium, which is the insurance that protects your lender if you default, and many buyers can purchase with no down payment. That frees up cash during a move, where many other loan types ask for around 3% to 5% down. Rates vary by lender and borrower, so I compare VA with other loan types using your actual numbers. The home needs a VA appraisal and has to meet VA's minimum property requirements, and you have to plan to live in it.