Home>>Mortgage News>> What is a VA Loan?
A VA Loan is a home loan that is backed by Veteran Affairs. There are several loan types available to those who meet the qualifications.
In order to qualify for a VA loan, the following must be true:
- Qualify for a VA-backed home loan Certificate of Eligibility (COE)
- Meet the designated standards for credit, income, and any other requirements
- Will live in the home you’re buying with the loan
VA Home Loan Benefits:
- No down payment as long as the sales price isn’t higher than the home’s appraised value
- Competitive terms and interest rates than other loan types
- No VA Loan Limit (for more information regarding VA Loan Limits please click here)
- No need for private mortgage insurance (PMI) or mortgage insurance premiums (MIP)
- PMI is a type of insurance that protects the lender if you end up not being able to pay your mortgage. It’s usually required on conventional loans if you make a down payment of less than 20% of the total mortgage amount.
- MIP is what the Federal Housing Administration (FHA) requires you to pay to self-insure an FHA loan against future loss.
- Fewer closing costs, which may be paid by the seller
- No penalty fee if you pay the loan off early
If you qualify for a VA-backed purchase loan, you can use the loan to:
- Buy a single-family home, up to 4 units
- Buy a condo in a VA-approved project
- Buy a home and improve it
- Buy a manufactured home or lot
- Build a new home
- Make changes or add new features (like solar power) to make your home more energy efficient
You can also:
- Get a VA-backed home loan to buy your first home
- Use your VA loan benefit to obtain a secondary loan
- Assume a VA-backed home loan (which means that instead of opening a new mortgage loan, the buyer takes over the seller’s loan)
What other loan types are available to veterans?
If you currently have a VA loan and are looking to reduce your monthly payment amount or change the terms of your mortgage a VA IRRRL may be right for you.
VA IRRRL (interest rate reduction refinance)
In order to qualify for a VA IRRRL, the following must be true:
- Already have a VA-backed home loan
- Are using the IRRRL to refinance your existing VA-backed home loan
- Can certify that you currently live in or used to live in the home covered by the loan
What are the benefits of a VA IRRRL? You may be able to:
- Lower your monthly mortgage payment by getting you a lower interest rate
- Make your monthly payments more stable by moving from a loan with an adjustable or variable interest rate (an interest rate that changes over time) to one that’s fixed (the same interest rate over the life of the loan)
Cash-Out Refinance
If you currently have an existing VA Loan and are looking to take cash-out for home renovation projects, education funds, consolidating debt, or other reasons, a cash-out refinance may be for you.
A VA Cash-Out Refinance may help you to:
- Take cash out of your home equity to pay off debt, pay for school, make home improvements, or take care of other needs
- Refinance a non-VA loan into a VA-backed loan
In order to obtain a cashout refinance out the following must be true:
- Qualify for a VA-backed home loan Certificate of Eligibility
- Meet VA’s and the lender’s standards for credit, income, and any other requirements
- Will live in the home you’re refinancing with the loan
Curious to see what your loan payment could look like? Try our interactive mortgage calculator below:
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