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Take Advantage of This Complete List of VA Loans

A Guide To The Types Of VA Loans:

VA loans, supported by the Department of Veterans Affairs, offer a pathway to affordable homeownership for eligible service members, veterans, and their surviving spouses. By qualifying for a VA loan, individuals can take advantage of numerous benefits such as no requirement for mortgage insurance, access to lower interest rates, and the possibility to secure a mortgage without needing a down payment.

There are various VA loan types available, including options for purchasing a home or refinancing your current mortgage, each designed to meet different needs. Let’s explore the array of VA loans at your disposal and delve into the criteria for eligibility.

Understanding VA Loans: 

VA loans are provided by private lenders, including banks, credit unions, and mortgage companies, not directly by the U.S. Department of Veterans Affairs. The federal backing of these loans reduces the risk for lenders and diminishes the initial financial burden on borrowers.

Similar to other federally supported loans, the government ensures that lenders are partially compensated for their losses if a borrower defaults on their mortgage and the property is foreclosed. This assurance enables lenders to offer loans with more attractive terms compared to those available through conventional or Federal Housing Administration (FHA) loan programs.

Why Choose VA Loans for Your Home Financing Needs? VA loans stand out not only because they are more accessible compared to traditional mortgage options but also because they offer the flexibility to finance home improvements, renovations, or even tap into your home’s equity.

Here are some key advantages of opting for a VA home loan:

·         Zero Down Payment Required: Opting for a VA loan means you can finance the entire purchase price of your home, provided your lender concurs. This eliminates the need to save up for a down payment.

·         No Need for Private Mortgage Insurance (PMI): VA loans exempt you from the requirement of PMI that comes with conventional loans lacking a 20% down payment. Instead, VA loan borrowers pay a VA funding fee.

·         Flexible Qualification Criteria: VA loans are known for their more lenient credit score and financial requirements, making it easier for qualifying service members to secure a mortgage.

·         Lower Interest Rates: Those who qualify for VA loans often enjoy lower interest rates than those available through conventional loan programs. The interest rate for a 30-year VA mortgage could be 0.25% to 0.42% lower than that of a similar conventional loan.

Exploring the Various VA Loan Options VA loans come in different forms, each with its set of benefits and potential drawbacks. It’s important to evaluate each option to determine which best suits your needs.

VA Purchase Loan The VA purchase loan, including the VA jumbo loan variant, represents the standard mortgage type under this program, enabling buyers to acquire homes with no down payment required, thus securing better terms than those offered by private lenders on conventional mortgages. Although the Department of Veterans Affairs does not mandate a down payment for these loans, individual lenders might have their requirements. Borrowers have the option between adjustable- and fixed-rate mortgages.

VA Renovation Loan The VA renovation loan allows borrowers to finance both the purchase and the renovation of a home, covering the costs of home improvements. This extends the benefits of traditional VA loans to include property upgrades, though availability may vary among lenders.

Native American Direct Loan (NADL) The NADL program is designed for qualified service members and their surviving spouses, where at least one party is Native American. This loan can be used to purchase real estate or refinance an existing mortgage. Like other VA loans, the NADL program permits financing the full purchase price of a home without a down payment, subject to lender requirements.

VA Refinance Loan Varieties For those interested in refinancing their mortgage, VA loans offer several options, provided you satisfy all necessary qualifications. Below are the VA refinance loans available.

VA Cash-Out Refinance This type of refinance allows homeowners to access up to 100% of their home equity to cover various expenses such as medical bills, educational fees, family debt, or even home improvement projects. It can also be used to enhance investment and savings portfolios.

Borrowers eligible for this loan have the flexibility to opt for a rate-and-term refinance. It’s important to note that while cash-out refinancing is available to homeowners without an existing VA loan, the amount of home equity accessible may be limited.

VA Interest Rate Reduction Refinance Loan (IRRRL) Also known as the VA Streamline Refinance, the IRRRL can assist in lowering monthly mortgage payments by reducing the interest rate or converting an adjustable-rate mortgage into a fixed-rate mortgage.

One of the benefits of this refinancing option is that it doesn’t require an appraisal or additional proof of income. Borrowers also have the option to include new borrowers with a joint VA loan. However, it’s crucial to consider the closing costs to decide if this route is worthwhile.

Eligibility Criteria for a VA Loan To be eligible for a VA loan, applicants must fall into one of the following categories:

·         Active-duty service members, National Guard or Reserve members, or veterans who meet specific service duration criteria

·         Surviving spouses of military personnel who passed away during active duty

·         Active-duty military members or veterans with service-connected disabilities

Prospective borrowers must also meet the credit and income criteria set by their lender, not the VA. Furthermore, the property purchased must be intended as the primary residence, excluding vacation or investment properties.

Requirement of a Certificate of Eligibility A VA certificate of eligibility (COE) is required to confirm your status as a qualifying service member or surviving spouse for a VA loan. This document can be obtained from the Department of Veterans Affairs. Note that surviving spouses may need to fulfill additional criteria for loan eligibility.

Property Eligibility Not every property qualifies for a VA loan. A VA-approved appraiser must verify that the home meets the VA’s minimum property standards and assess its value according to current market guidelines. If the appraisal does not meet expectations, the lender may deny the loan application.

Evaluating Different VA Loan Programs 

It’s important to recognize that various VA loan programs each have their unique advantages and limitations. When embarking on the journey to purchase or refinance your home, it’s crucial to begin by exploring which program aligns best with your family’s needs. Shopping around for a lender who not only offers competitive rates but also has a deep understanding of the different VA loans can be beneficial.

Understanding the VA Funding Fee Unlike conventional loans, VA loans exempt borrowers from needing private mortgage insurance (PMI) when making a down payment of less than 20%. Instead, VA loan recipients are required to pay the VA funding fee. This fee, mandated by the federal government, ranges between 1.25% and 3.3% of the loan amount for purchase loans as of April 2023. Borrowers have the option to pay this fee upfront or roll it into the overall loan amount, influenced by the size of the down payment.

The exact funding fee percentage depends on various factors, including the borrower’s specific situation and the type of loan they are securing.

VA Funding Fee Breakdown 

To give you an idea, here is a quick guide on the VA funding fee amounts you might expect to pay, taking into account your down payment size and whether it’s your first time utilizing a VA loan.

[tables of funding fees]

 

Purchase And Construction Loans

 

Your Down Payment

Your Funding Fee

First Use

      Less than 5%

2.15%

 

5% – 9.9%

1.5%

 

10% or more

1.25%

Subsequent Uses

Less than 5%

3.3%

 

5% – 9.9%

1.5%

 

10% or more

1.25%

 Other VA Loan Types

Loan Type

First Use

Subsequent Uses

NADL Purchase

1.25%

1.25%

NADL Refinance

0.5%

0.5%

Cash-Out Refinancing

2.15%

3.3%

Availability of Funding Fee Waivers 

For those with service-connected disabilities, it’s possible to secure a waiver for the VA funding fee. For questions regarding eligibility for a waiver of the VA funding fee, reaching out to the Department of Veterans Affairs is advised.

Frequently Asked Questions on VA Loan Programs 

Below are common inquiries concerning the types of VA loans and how to obtain one.

What determines VA loan limits? 

The limits of a VA loan are not directly tied to the loan type but are instead dependent on the maximum mortgage amount a lender is prepared to offer. Factors such as your income, credit score, debt-to-income ratio, and others can influence these limits.

How do I choose the right VA loan type? 

Your choice should be informed by your eligibility, personal circumstances, financial situation, and goals. A VA Interest Rate Reduction Refinance Loan (IRRRL) might be suitable if you’re looking to refinance, whereas a VA cash-out refinance could be ideal for making home improvements if you have built up equity. For those purchasing a home, a VA purchase loan might be financially advantageous.

Is a down payment required for VA loans? 

Generally, VA loans do not require a down payment. However, for jumbo loans that exceed the standard lending limit of $766,550 in most areas, lenders might ask for a down payment.

What types of property can be financed with a VA loan? 

VA loans are designed to assist eligible individuals in financing their primary residences. This excludes the possibility of using VA loans for vacation properties or undeveloped land. However, a VA loan might be used for an investment property like a quadplex, provided you occupy one of the units as your main residence.

Conclusion: Various Loan Options for Veterans 

Veterans are presented with a multitude of VA loan options, including purchase loans, cash-out refinances, IRRRLs, Native American Direct Loans (NADLs), and renovation loans, each catering to different needs.

These loans offer the opportunity to secure a mortgage for a single-family home, condo, or townhouse on more favorable terms compared to conventional or FHA loans. Veterans and active-duty service members stand to gain substantial benefits.

For those who qualify, a VA loan represents a formidable option for either purchasing a new home or refinancing an existing mortgage. Interested parties are encouraged to apply online, for instance, with Rocket Mortgage®.

Reed Letson

Reed Letson

Reed offers two decades of expertise as a mortgage broker, focusing on veterans and first-time home buyers. With a strong grasp of real estate and mortgage markets, he empowers clients with practical insights. Reed's passion is guiding clients to build wealth through real estate investments and financing solutions.

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