VA Loans Guaranty Programs
Whether you are an active duty service member, a veteran, in the National Guard, or in the reserve, the United States Department of Veterans Affairs (VA) offers guaranty programs that help those who have served and protected our country afford homes. The VA does not lend money for VA loans, however, it backs loans made by private lenders. VA home loans are provided by private lenders, such as banks and mortgage companies, and the VA guarantees a portion of the loan, which enables the lender to provide more favorable terms.
Benefits of a VA Mortgage
The assurance that the VA provides to lenders allows them to offer qualifying borrowers more favorable terms, including:
- No down payment (if the sales price does not exceed the appraised value);
- No private mortgage insurance premium requirement;
- Limited amount charged for closing costs;
- No penalty for early loan payoff;
- The VA benefit is reusable (depending on limit); and
- VA loans are assumable by qualifying individuals.
Like any loan you must have suitable credit and sufficient income to qualify for a VA mortgage. In addition, to qualify for a VA loan the borrower must have a valid Certificate of Eligibility (COE). The home being purchased must be for the borrower’s personal occupancy whether they are buying a home, condo, building a home, purchasing and improving a home or buying a manufactured home or lot.
In addition, whether a veteran or an active duty military member, there is a required minimum active duty service requirement. To obtain the COE the military member must have been discharged honorably and meet certain service requirements. If active duty military, the borrower must have served active duty for 90 days prior to obtaining the COE. If a veteran, the required active duty depends on the active duty dates and qualifying wartime.
Types of VA Loans
There are several types of loans offered through the VA. The Purchase Loan allows military members to purchase a home at a competitive interest rate and typically requires no down payment or mortgage insurance. The Cash-Out Refinance Loan is for homeowners who want to take cash out of their home equity and use it toward home improvements or other investments. An advantage to the Cash-Out Refinance Loan is that it can be used to refinance a non-VA loan into a VA loan.
Another loan is the Interest Rate Reduction Refinance Loan (IRRRL). This refinancing program can lower an existing VA loan interest rate. An IRRRL can only be made to refinance property that used VA loan eligibility and it must be a VA-to-VA refinance. There are many advantages to this program including no appraisal or underwriting packages required. On the other hand, the interest rate may increase if you are refinancing an adjustable rate mortgage (ARM) to a fixed rate mortgage. A new COE is not required for the IRRRL and the occupancy requirement is different than other VA loans.
Additionally there exists the Native American Direct Loan (NADL) Program for eligible Native American veterans and housing grants for disabled veterans. To explore the various types of loans and whether or not you are eligible, the U.S. Department of Affairs website can provide more information.
Best Mortgage Rates
Once you have determined the right loan for you and that you are eligible, you want to find the best lender and the best mortgage rate for you.
Best Mortgage Rates allows you to search and compare mortgage rates across the nation and filter by loan type so that you can get the best mortgage rate possible for your VA home loan or refinancing under the IRRRL. Use our easy online tool today to find the best mortgage rate.