The United States Department of Veterans Affairs guarantees several types of mortgage loans that eligible military personnel can take advantage of. They are loans for home purchase, refinance, streamline refinance, the Native American Direct Loan Program, and adapted housing grants. VA loans enable men and women in uniform to take advantage of favorable lending terms.
VA Loans are not typically provided by the VA or federal government itself, but are private loans from everyday mortgage lenders that are insured by the government. Because of the federal guarantee, lenders can offer terms and loan options not available with traditional mortgages.
Though there is no specification on the VA’s part as to a required credit score, private lenders will often have their own requirements, and are likely to accept a lower than usual score, considering the nature of the loan. Prospective lenders will have to provide a Certificate of Eligibility as well.
VA Loan for Home Purchase
Loans for new home purchase include fixed rate, adjustable rate (ARM), and VA jumbo loans. Fixed rate loans keep the same APR for the life of the loan, and payments generally remain the same each month.
With the adjustable rate option, the rate stays fixed for an agreed upon period, then fluctuates at regular intervals reflecting the current rates. People choose adjustable rate mortgages because the rate for the initial fixed period can be much lower than the fixed option. They are then at the mercy of the market once the fixed rate period is over, but rates can also go down, in which case some lenders allow borrowers to convert their loan into a fixed rate. Jumbo loans are for properties over the $417,000 limit and require a downpayment.
For regular military personnel, the fees for these loans are as follows:
5% - 9.99% Downpayment
10% or more
VA Refinance and Cash Out Refinance
Qualifying service members that already have a home can take advantage of lower market rates AND the VA loan program’s favorable terms to either reduce their monthly payment, alter their mortgage term, or both with a VA refinance loan. This type of loan is subject to the same qualifications as a VA home purchase loan. The fee is set at 2.15 for regular service members, regardless of the situation.
A cash-out refinance is when you remove some of your home’s equity in the form of cash and then bundle that amount into the new refinanced loan. This money can be used for anything. Typically uses include medical emergencies, home improvements, and college tuition.
Interest Rate Reduction Refinance Loan (IRRRL)
This is also called a VA Streamline Refinance. It is a refinancing of a VA loan that you already have, essentially a “VA to VA” loan. With an IRRRL you can use your original qualifying documents. What’s more, you won’t incur any out-of-pocket fees. It does not require an appraisal or underwriting package. This type of loan enables you to take advantage of lower rates to get a lower monthly payment and/or adjust your term to pay off the house more swiftly.
Native American Direct Loan Program (NADL)
This is a program for Native American veterans. It enables qualified borrowers to purchase, refinance, build or improve homes. In addition to the regular VA loan qualifications there are some additional stipulations:
- Home must be on Native American Trust lands
- Tribal organization must participate in VA loan program
- You must remain in occupancy
- Combined family income must be sufficient for monthly payments and other costs associated with owning a home
Adapted Housing Grants
For veterans with total or permanent disabilities that arose as a result of their service. The VA issues grants to help these individuals purchase a new adapted home, or renovate their existing home to accommodate their disability. The two grant programs are called the Specially Adapted Housing (SAH) or Special Housing Adaptation (SHA).
Now that you are filled in as to all the various options that exist under VA loans, take a look at our Top Ten VA Loan Providers for this year. Many of them offer all the above programs.