VA Home Loans
Military homebuyers, veteran service members, and eligible spouses surviving a service member may purchase or refinance a home under the unique VA home loan program. This powerful loan program allows home borrowers the benefit of home ownership with no money down and competitive interest rates. Because loans are government backed, banks and private lending institutions assume less risk making it easier to qualify for a mortgage. For current homeowners, the opportunity to negotiate better loan terms and take cash out of the home exists as well.
Conventional home loans require more stringent qualifications since there is no guarantee that the money will be paid back. Large down payments and private mortgage insurance necessary to “guarantee” the loan put home ownership out of reach for many military homebuyers.
Who benefits from VA loans?
- Active-duty personnel, veterans, members of reserve units, National Guard members, and some surviving spouses may be eligible for attractive, VA home loans.
- Banks and mortgage lenders make low-risk, secure mortgage loans to thousands of servicemen and women.
- Home sellers and new homebuilders attract qualified homebuyers.
Features of VA Loans
- No down payment required, (for qualified borrowers)
- Competitive interest rates available
- Financing available for funding fee
- Reduced funding fees in certain circumstances
- Limits on closing cost charges
- Comparable closing costs with conventional home loans
- Seller may cover closing costs
- Private mortgage insurance is not required
- Mortgages may be assumed
- Prepayment of mortgage with no penalty
- Builder warranty/cooperation, (if inspected by VA) during construction
- Temporary payment assistance if buyer is in default
Things To Know
- The VA home loan program is not just for first-time homebuyers.
- The benefit can be reused over and over.
- A VA backed loan may be assumed as long as the buyer qualifies.
- The VA does not generally get involved in the loan approval process.
- The VA does not lend service personnel money, but agrees to “stand behind” a portion of the home loan made by banks and mortgage companies.
- The VA loan guarantee, (created to cover possible losses to the lender) essentially takes the place of private mortgage insurance.
- The VA loan is approved for the purchase of many types of properties besides a site-built home including, a condominium, mixed-use property, multi-family unit, manufactured or modular home.
VA Loan Types
The Veteran’s Administration backs three different types of loans, each designed to assist either new homebuyers or existing homeowners.
- Purchase Loans—This loan is made for the purchase of a home at competitive interest rates.
- Interest Rate Reduction Refinance Loan, (IRRRL)—This is also referred to as a VA Streamline Refinance Loan. The IRRRL allows service men and women the opportunity to refinance an existing VA home loan, for better interest rates and terms. The loan is particularly attractive since no proof of income or bank statements are required to qualify.
- Cash-out Refinance—This type of VA loan allows the borrower to refinance the existing mortgage and take cash out of the equity in the home. This can be used to make home improvements, pay off debt, or make a large purchase, etc. The VA’s Cash-Out Refinance Loan can be used to refinance a conventional home loan into a VA loan as well.
What’s Not Covered By VA Loans?
Non owner-occupied homes including, rental properties, vacation homes, farm land (without occupancy of a full-time residence) recreational vehicles such as campers, motor homes, fifth-wheels, travel trailers, or buses designed or modified for habitation, and residences outside the United States, are not eligible for VA home loans or refinance programs.