Millions of veterans use VA home loans to secure financing for the purchase of a home. If you are a veteran or military family member, you could qualify for the home loan program offered by the Department of Veterans Affairs (VA).VA home loans provide a wide array of perks and benefits for prospective homeowners.
To secure a VA loan, you must meet a few requirements regarding military service and other personal factors. There are a handful of home loans available from the VA. Continue reading to learn more about each type and how to qualify.
VA home loans help veterans and their families purchase, build and refinance homes throughout the United States. The Department of Veterans Affairs (VA) has several veteran-specific programs designed to ease the transition back into civilian life.
Buying a home is a big financial commitment. As a veteran, you can secure a VA loan with more flexible financing options. For example, VA loan rates tend to be a bit lower than other types of mortgages, although rates vary between lenders.
Most veterans applying for VA home loans do not need to make a down payment, saving them thousands of dollars in upfront costs. Most conventional loans require a 20% down payment, and even FHA loans usually require a payment of at least 3.5%. By waiving the down payment requirement, veterans can find and purchase a home more easily without the added stress.
VA home loans are offered in two distinct types:
1. VA Backed Loan
2. VA Direct Loan
A VA backed mortgage is one that is guaranteed by the VA, not issued by the VA. Instead, the loans are issued through individual mortgage lenders that have been approved by the federal government. If a borrower stops making payments, the mortgage lender is protected from financial loss. This reduced financial risk helps lenders ease their qualifications.
Most VA home loans are VA backed loans. There are three types of VA backed mortgage loans provided by the VA:
· Purchase loan – Veterans can use this VA loan to buy a home that will serve as his or her primary residence.
· Cash-out refinance loan – Veterans who already have a mortgage can use this VA home refinance loan to refinance, which is the process of replacing one mortgage with another. Veterans can also use it to convert the equity in the home to cash that can be used to pay off debt, make home improvements or any other purpose.
· Interest rate reduction refinance loan – This VA loan is for veterans who already have a mortgage but want to lower their interest rate. It can also be used to change the loan term from 30 years to 15 years or change the way interest is charged, from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage.
There is only one type of VA direct loan, which is the Native American Direct Loan (NADL). This VA loan is only available for Native American veterans and their spouses.
Interested a VA loan, but not sure if you qualify? Continue reading the next slide to learn more about the qualification requirements for each type of loan.