Which type of loan is guaranteed by the U.S. Department of Veterans Affairs (VA)?

VA loans are a specific type of mortgage loan backed by the U.S. Department of Veterans Affairs, specifically designed to assist eligible veterans, active-duty service members, and certain members of the National Guard and Reserves in obtaining home financing. The primary characteristic of VA loans is that they do not require a down payment and do not mandate private mortgage insurance (PMI), which can make home ownership more accessible for those who have served in the military.

These loans often come with favorable terms, such as competitive interest rates and lower closing costs, as a way to honor the service of military personnel. The VA guarantees a portion of the loan, which reduces the risk for lenders, encouraging them to offer more favorable financing options to veterans.

In contrast, FHA loans are insured by the Federal Housing Administration, conventional loans are not backed by any government entity and can have varied down payment requirements, and subprime loans cater to borrowers with poor credit scores at higher interest rates. None of these options offer the unique advantages and guarantee provided specifically through VA loans.