The VA loan is a mortgage that requires no money down for Veterans and current active military members that have met their time in service requirements. The VA does not issue the loan, but they determine the eligibility of its members. The VA loan is backed by the Department of Affairs and issued by private lenders.
What Types of Loans Are Available?
Each different type of VA loan comes with its own benefits and disadvantages – you’ll want to compare features and options to determine which is the right fit for you.
VA Purchase Loan
A VA purchase loan is the standard form of mortgage that you might expect to see issued under a VA loan. The loan allows a borrower to purchase a property with no money down. Under a VA loan, the terms are likely to be better than that of a conventional loan issued by a lender.
VA Cash-Out Refinance
A VA cash-out refinance loan allows a person to take out 100% of the home’s equity and use that money to be used for a number of uses including paying off debt, paying for education, or any other use that the person needs. For example, the cash-out refinance can be used for a down payment on another home, home improvements, or to improve savings and investment accounts. This provides more value than a conventional or FHA loan. It should be noted that it is made available to people that do not have VA loans.
VA Interest Rate Reduction Refinance Loan (IRRRL)
A VA (IRRL) is one package that can help a person reduce their monthly mortgage payments on an existing home. The package reduces the interest rate on the loan and allows the borrower to refinance their current loan with terms that are more favorable. The advantages of this loan is that there is no need for an appraisal and no need for the borrower to provide additional documentation on income. One of the caveats to this loan is that the borrower should take into consideration the fees for refinancing. The other caveat is that the borrower must intend to live in the home.
VA Native American Direct Loan (NADL)
One program that is available to Native American veterans is the VA Native American Direct Loan. It is intended for people that are Native American veterans or someone who is married to a Native American. Under this program, a borrower can buy, build, or improve a home that is situated on federal trust land. The program also allows qualified borrowers to refinance a current NADL loan to obtain a lower interest rate. The advantage of this program is that the closing costs on the loan are limited and there is no need for private mortgage insurance.
VA Renovation Loan
A VA renovation loan allows borrowers to obtain funds that can be used to purchase and renovate the property. Borrowers are allowed to finance the cost of home improvements. This program mitigates the alteration and repair of a home. It should be noted that there are many lenders that do not offer this loan option.
Lenders vary in terms of the products and services they provide, so it is best to shop around.
Among the private lenders that issue VA loans include:
Companies such as Veterans United Home Loans, have the advantage of employing ex-military members. This enables them to educate people on issues such as owning a home or working through the process to apply for a mortgage loan. In addition, some finance companies offer credit counseling and other educational programs designed to help future VA loan borrowers.
USAA is a financial institution tailored to the needs of the military. It offers banking, insurance, and investing services to its members that have served or are serving in the military. Among its services, is providing VA home loans as part of its mortgage portfolio. Because it is tailored to the military, the services it provides are generally not open to members outside of the military.
Another company that is tailored to the military is the Navy Federal Credit Union. It is open to all members of the Department of Defense, both military and civilians. The Navy Federal Credit Union offers mortgage services that include VA, FHA, and conventional mortgages. Among the services that Navy Federal Credit Union offers is Freedom Lock, which allows a borrower to lock in an interest rate at a lower rate. If rates go down, then the borrower can lock in the rates at a lower interest rate. Another advantage is that if a borrower finds a lower rate with another company, then Navy Federal will match it or offer $1,000 to the borrower.
Quicken Loans and Rocket Mortgage offer services that can be done online. With Quicken Loans, the interest rate is locked in for up to 90 days on a conventional, VA loan, or an FHA loan. The exact interest rate is determined on the day that one closes on the property. Rocket Mortgage also offers VA loans.
In order to qualify for a VA loan, one must check their eligibility. The other benefit of the VA loan is that one does not have to pay mortgage insurance.
While, one is in the process of purchasing their loan, it is important to keep in mind that there is a funding fee associated with the down payment.
See also: Comparing a VA Loan to a Conventional Mortgage