VA loans are mortgages where the loan is guaranteed by the federal government. It is only available to veterans and spouses of veterans who were killed a result of their military duties. It extends to not only Army, Navy, Air Force and Marines but also to Reservists and National Guardsmen.

The VA loans are without question the best low down payment loan on the market for a number of reasons.

The Veterans Administration assesses a Funding Fee to all VA loans. This is a fee assessed and required by the VA. It can be viewed as similar to PMI on conventional loans and FHA MIP on FHA loans. A veteran will be required to pay a VA Funding Fee of between .5% and 3.3% of the loan amount. This fee may be waived for veterans who qualify as a result of a service related disability. The funding fee may be rolled back into the loan and financed as part of the mortgage. The cost for the VA Funding Fee provides for a significantly lower monthly payment than the mortgage insurance costs associated with low down payment conventional loans.

From a qualifying standpoint, VA offers excellent qualifying standards. They typically do not use credit scoring in their analysis of the loan. If the veteran has experienced some difficulties in their life that is causing their scores to be low but have maintained a good payment record over the past year or so, they may qualify for a VA mortgage. This can be a tremendous savings when compared with the cost of conventional loans when the borrower's credit scores are low.

VA loans are also assumable. However, unless the person assuming the mortgage is another veteran with VA eligibility, the original veteran will be giving up the amount of eligibility that they used to get the loan a the beginning. Veterans should use great care and closely investigate the terms of an assumption before allowing someone to assume their mortgage. It is too great a benefit to give up.

VA loans also have built in features that allow for a loan to be refinanced to a lower interest rate without all of the criteria normally associated with a loan. Called an Interest Rate Reduction Loan, the veteran can secure a lower interest rate without any credit checks, appraisal, income or asset verification and can roll the costs of the transaction into the loan so there are no out of pocket costs.