Everything You Need To Know About VA Loan and How Does It Work
If you’re in the market to buy a home, a VA loan could open up a window of opportunity that you might not have previously considered. Read on for information on how VA loans work, eligibility guidelines for this type of loan, and VA loan benefits.
What is a VA Loan?
Issued by a private lender, a VA loan is guaranteed by the Department of Veterans Affairs. A VA loan offers a mortgage with a lower-than-most interest rate and usually requires no down payment unless the purchase price of the home is more than the appraised value of the property or it’s higher than the local VA loan limit. As with any other mortgage, you complete the loan process with a mortgage lender.
VA loans are designed to help those who serve and have served in the military buy a home, including qualified U.S. veterans, active-duty military personnel, and certain surviving spouses.
You are likely to be eligible for a VA mortgage loan if you:
1. Are active-duty military
2. Were separated from military service in a situation “other than dishonorable discharge”
3. Meet specific length-of-service requirements
4. Are a reservist or a member of the National Guard
5. Are a qualified surviving spouse of a deceased veteran
Additional VA loan requirements include having a valid certificate of eligibility from the VA, purchasing a home that must be your primary residence, and satisfying your lender’s credit score requirements.
VA Loan Benefits
In addition to lower-than-most rates and the waiving of a down payment requirement, VA loans offer a range of benefits that can help make completing a home purchase easier and less complicated.
Some of the major benefits of a VA loan include:
1. No mortgage insurance requirement
2. Limited closing costs
3. Eligibility even if you’re not a first-time homebuyer or if you’ve declared bankruptcy in the past
4. Financing that can be used for repairs and renovations
5. The loan can be assumable, meaning it can be taken over by the person who buys your house even if they’re not a service member.
6. Counseling to help borrowers retain a home through serious financial difficulties
VA Loan Types
VA loans can help you with everything from purchasing a home to renovating one.
You can use a VA loan to buy an existing home or a condominium in a VA-approved development or to build a new home.
Adapted Housing Grants
These grants assist veterans with service-related disabilities purchase, build, or modify homes for easier accessibility and better living.
Interest Rate Reduction Refinance Loan
With a VA IRRRL (pronounced “Earl”), 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- to a fixed-rate loan.
You can replace your mortgage with a new loan by taking advantage of a VA cash-out refinance. By tapping some of your home’s value you can pay off debt or make home improvements; this type of refinance can also be used to replace a non-VA loan with a VA loan.
Native American Direct Loan Program
This loan program helps qualified Native American veterans to buy, build, improve, or refinance a home located on federal trust land.