As a veteran or if you’re an active duty service member, you may have access to a VA loan program that will help you with purchasing a home. The benefits of these programs may include lower down payment requirements, no private mortgage insurance requirements, and easier qualifications. Some flexible options will enable you to buy more than one house, finance a remodel, or cash out all the equity in your house. It's important to compare these programs to find the home loan that meets your needs. Below is a breakdown of the types of home loans that are available to veterans. This information will help you determine which loan is best for accomplishing your goals.
VA Purchase Loans
This is the standard loan program used for veterans and military members who want to buy a new home. There's no down payment required as long as the home's appraised value isn't higher than the purchase price. Interest rates are generally more favorable than other types of loans from mortgage companies, credit unions, and private banks. Private mortgage insurance or mortgage insurance premiums aren't required for borrowers of VA purchase loans. There's also fewer closing costs and no penalty if you pay off the loan early.
You must obtain and qualify for a Certificate of Eligibility, meet the VA and lender's credit, income, meet other lender requirements that may apply, and intend to live in the home you will be purchasing. The loan must be used to buy a single-family home (up to 4 units), a VA-approved condo, manufactured home or lot, for the building of a new home, to purchase and improve a home, or to make changes and add new features to make a home more energy-efficient.
VA Cash-Out Refinance Loans
You can access your home's equity with a VA cash-out refinance loan. The cash can be used for whatever you need. It's best to use this option for financially sound reasons, like paying off high-interest credit card debt or improving a home. It can also refinance a non-VA loan into a VA-backed loan.
To be eligible for a cash-out refinance loan, you must meet the qualifications, which are to obtain a Certificate of Eligibility, live in the home you're refinancing, and meet the VA's and lender's credit, income, or any other requirements. Keep in mind that with a refinance, you will be paying closing costs. Your lender should breakdown the costs for you before the refinance so you understand what you’re paying for, and can ask questions ahead of the closing.
VA IRRRL
IRRRL stands for the interest rate reduction refinance loan. It's also known as the VA streamline refinance loan. With this type of loan, you aren't required to get an appraisal or provide income documentation. These loans are commonly used to reduce the monthly mortgage payments or stabilize the payments you make.
You must have an existing VA-backed home loan and be using it to refinance your existing VA-backed home loan to take advantage of this refinancing option. Also, you must certify that the home covered by the loan is where you are currently living or previously lived in. If there's a second mortgage on the home you are refinancing, the holder must make the new loan the first mortgage.
Other Things to Know About Home Loans for Veterans
With most loan programs, you have to wait three to four years after a foreclosure or bankruptcy before applying for a home loan. The VA's waiting period is two years, enabling you to buy a home faster. If you don't make a down payment on the loan, a funding fee is applied to your loan amount. This takes the place of mortgage insurance. The funding fee might be waived if you have a disability.
The ability to purchase a second home with no down payment is particularly handy for military members who are relocated. Often, there's not enough time for an individual to sell their home before buying a new one. Your first loan can also be assumed. The loans lower interest rate could be desirable to another home buyer.
Here's a calculator to help determine what your VA loan payments will be based on the purchased price, down payment, interest rate, military experience, and prior VA loan use. When you are ready to apply for a VA home loan, NASB can help. Give us a call at 855-465-0753 to start the process or get answers to your questions.
