Mortgage Dictionary
VA Loan Terms:
Plain-English definitions every veteran should know.
9 plain-English definitions, server-rendered, free for everyone.
VA Loan Mortgage Terms Glossary
What is the va loan terms glossary for?
This VA loan glossary defines the terms veterans and servicemembers encounter when using their VA home loan benefit. From the Certificate of Eligibility to the VA funding fee and IRRRL, every definition is written in plain English with no jargon.
VA Loan Mortgage Terms Glossary
- Assumable Loan
- A mortgage that can be transferred from the current owner to a qualified buyer, who takes over the existing loan terms including the interest rate. VA and FHA loans are generally assumable with lender approval. In a high-rate environment, an assumable loan at a lower rate can be a significant advantage for a buyer.
- Assumption
- The process by which a buyer takes over the seller's existing mortgage, including its remaining balance, interest rate, and terms. Requires lender approval and a qualification review of the new borrower. If approved, the original borrower is typically released from liability. If not released, the original borrower remains responsible if the new borrower defaults.
- Certificate of Reasonable Value (CRV)
- A document issued by the VA after an appraisal that establishes the maximum value the VA will allow for a property. The loan amount cannot exceed the CRV. If the purchase price exceeds the CRV, the buyer can negotiate with the seller, pay the difference in cash, or walk away.
- Department of Veterans Affairs (VA)
- The federal agency that administers VA loan benefits for eligible veterans, active duty servicemembers, and surviving spouses. The VA does not make loans directly but guarantees a portion of each loan, which allows lenders to offer favorable terms including no down payment. The VA also sets property requirements and appraisal standards.
- Government Mortgage
- A mortgage insured or guaranteed by a federal agency: FHA (Federal Housing Administration), VA (Department of Veterans Affairs), or USDA (Rural Housing Service). Government mortgages allow lenders to offer terms not available on conventional loans, such as lower down payments, more flexible credit requirements, and no PMI. The government guarantee protects the lender, not the borrower.
- Insured Mortgage
- A mortgage backed by government insurance that compensates the lender if the borrower defaults. FHA mortgages are insured by the Federal Housing Administration. VA mortgages are guaranteed (not insured) by the Department of Veterans Affairs. USDA mortgages are guaranteed by the Rural Housing Service. Insurance allows lenders to offer more favorable terms than conventional uninsured loans.
- Loan Assumption Fee
- A fee charged by the lender when a qualified buyer assumes an existing mortgage. VA and FHA loans are assumable with lender approval. The assumption fee covers the cost of qualifying the new borrower and processing the assumption. Typically much less than standard origination fees on a new loan. The original borrower should obtain a release of liability from the VA or FHA after a successful assumption.
- VA Funding Fee
- A one-time fee paid on VA loans that helps fund the VA home loan program. Ranges from 0.5% to 3.3% depending on loan type, use, and down payment. Veterans with a service-connected disability rating of 10% or higher are typically exempt.
- VA Loan
- A mortgage backed by the U.S. Department of Veterans Affairs for eligible veterans, active duty servicemembers, and surviving spouses. Offers 0% down payment, no PMI, and competitive rates.
Frequently asked questions
What is a Certificate of Eligibility for a VA loan?
The Certificate of Eligibility (COE) is the document the VA issues that confirms a veteran, active duty servicemember, or eligible surviving spouse qualifies for a VA-backed home loan. The COE shows the borrower's entitlement amount. Lenders require it before processing a VA loan application. Most COEs can be requested online through the VA's eBenefits portal or by the lender.
What is the VA funding fee and who is exempt?
The VA funding fee is a one-time charge paid to the VA on most VA loans to keep the program self-sustaining. The fee ranges from 1.25% to 3.3% depending on down payment, loan type, and prior VA loan use. Veterans receiving VA disability compensation, Purple Heart recipients, and certain surviving spouses are exempt from the fee.
Can a VA loan be assumed by a new buyer?
Yes. VA loans are assumable with lender approval. A qualified buyer can take over the existing loan, including its interest rate, by going through a credit and income review. In a high-rate environment, an assumable VA loan at a low rate can be a significant advantage. The seller's VA entitlement is typically not restored unless the new buyer is also a VA-eligible borrower.
What is a VA IRRRL?
The VA Interest Rate Reduction Refinance Loan (IRRRL), also called a VA streamline refinance, lets veterans refinance an existing VA loan to a lower rate with minimal documentation and no new appraisal in most cases. There is no requirement to verify income or credit through a full underwrite. Closing costs can be rolled into the new loan. The IRRRL must result in a lower payment or convert from ARM to fixed.
See all mortgage terms
The full dictionary covers 382 terms across every loan type and stage of the homebuying process.