What coverage does a VA mortgage provide to lenders?

A VA mortgage primarily provides a guarantee to lenders against losses incurred from non-payment by the borrower. This guarantee is a form of protection for lenders, ensuring that if a borrower defaults on their loan, the government will compensate the lender for a portion of the outstanding balance. This incentive encourages lenders to offer favorable loan terms to veterans and active-duty service members, as the risk associated with lending to these individuals is mitigated by the VA’s backing.

While the options mention insurance against foreclosure, protection against market fluctuations, and tax benefits, these do not accurately represent the core purpose of the VA loan program. The emphasis of the VA mortgage is specifically on guaranteeing lenders against losses from borrower default, which helps facilitate access to home loans for military personnel who may have challenges qualifying for traditional financing.