VA home loans are ones guaranteed by the U.S. Department of Veterans Affairs. They were created by the government in 1944; since then, more than 24 million VA loans have been originated, helping veterans, active duty military members and their families purchase or refinance a home.
The fact that these loans are backed by a government agency makes lenders feel more comfortable in offering them, as they pose less risk. As a result, it’s possible to get a VA loan without a down payment, and with sometimes-looser credit requirements.
The basic intention of the VA home loan program is to supply home financing to eligible veterans and to help veterans purchase properties with no down payment. The loan may be issued by qualified lenders.
Different Types of VA Loans
VA Cash-Out Refinance
Replaces your mortgage with a new loan while tapping some of your home’s value for things like paying off debt or making home improvements. It also can be used to replace a non-VA loan with a VA loan.
VA IRRRL (also called a streamline refinance loan)
You can replace an existing VA loan with a mortgage offering a lower interest rate, or move from an adjustable-rate loan to one with a fixed interest rate.
VA renovation loans
Allow borrowers buy or refinance a home and roll the cost of improvements into the mortgage.
VA Supplemental Loans for Home Improvements
Can be added to an existing mortgage or included in a VA refinance.
A VA loan can only be used to buy or build a primary residence or to refinance an existing loan. So you won’t be able to buy an investment property or vacation home with one.
You’re required to pay a VA loan funding fee between 1.25% and 3.3% of the loan amount. The fee is usually included in the loan, so it increases your monthly payment and adds to the interest you pay over the life of the loan.
Advantages of VA
You can buy a home with no down payment
There is no limit to the amount you can borrow on a VA loan
You won’t have to pay Private Mortgage Insurance (PMI, since the loans are backed by the government
Closing costs are the various fees and expenses you pay to get a mortgage. The Department of Veterans Affairs limits the lender’s origination fee to no more than 1% of the loan amount and prohibits lenders from charging some other closing costs
There’s no minimum credit score requirement
Mortgage rates are lower for VA home loans than for FHA and conventional mortgages
The VA offers assistance for struggling borrowers facing a potential foreclosure. The agency’s loan technicians can negotiate with lenders on behalf of borrowers who are having trouble making mortgage payments
There is no prepayment penalty
You don’t need to be a first-time home buyer in order to get a VA loan
Bankruptcy and foreclosure won’t permanently affect your chances
I have over 25 years’ experience in banking providing real estate financing and construction financing for commercial and residential properties.
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