Question

There is no UPFRONT or Mortgage Insurance Premiums (MIP) required for VA loans, but borrowers MUST:

Please select the appropriate option from the following:

A) Pay a funding fee
B) Provide a credit score
C) Purchase a homeowners insurance
D) Pay for a home appraisal

Answer 1

Option (C), Borrowers of VA loans must pay a funding fee, which helps offset the cost to taxpayers in the event of a default. This requirement exists instead of upfront or Mortgage Insurance Premiums that are common with other types of loans, making homeownership more accessible for veterans.

Step-by-step explanation:

For VA loans, borrowers are not required to pay an upfront or Mortgage Insurance Premiums (MIP), but they must pay a funding fee. This fee is a percentage of the loan amount and is paid either at closing or can be financed along with the loan amount.

The requirement of a funding fee is a way for the VA to offset the cost to taxpayers of a default on a mortgage. In contrast, conventional loans often require a 20% down payment or mortgage insurance if less is put down. VA loans offer the benefit of a 0% down payment without the need for mortgage insurance, which can make homeownership more accessible to veterans.