VA HOME LOANS

The Veterans Benefits Administration (VBA) provides federal guarantees of home loans for qualified applicants. To be eligible for a VA-guaranteed home loan, veterans must have served on active duty in the Army, Navy, Air Force, Coast Guard, or Marines.

The specific service requirements will vary, depending on the time period during which a veteran served. A certificate of eligibility is required to obtain a VA loan, and the loan can be obtained through any mortgage lender who participates in the VA home loan program. The VA-guaranteed home loan is one of very few 0% down payment loans available in the United States (the USDA Rural Housing Loan is another).

 

KEY POINTS OF A VA LOANS:

  • A VA loan is a mortgage offered through a Department of Veterans Affairs program.
  • Available to active and veteran service personnel and their families, VA loans are backed by the federal government, but issued through private lenders.
  • VA loans have generous terms, such as no down payment, no mortgage insurance, no prepayment penalties and limited closing costs.

VA loans assist active service members, veterans, and surviving spouses to become homeowners. The individual presents a certificate of eligibility from the VA to the lender in the course of a loan application. Although some of the lender’s own underwriting requirements must still be met, in most cases, VA loans are easier to qualify for than conventional loans.

The Veterans Administration offers a home loan guaranty benefit and other housing-related programs to help qualified veterans or their eligible family members buy, build, repair, retain or adapt a home for personal occupancy. VA loans offer up to 100% financing on the value of a home. VA loan recipients do not have to be first-time home buyers. Also, they may reuse the benefits and assign the loan to another qualifying person. 

The terms of VA loans are quite generous, compared to other mortgages and even other federal loan programs. Among the benefits:

  • No down payment is mandated unless required by the lender, or if the residence’s purchase price is above the established property value.
  • There is no private mortgage insurance premium requirement.
  • Closing costs are limited and may be paid by the seller.
  • The lender may not charge a prepayment penalty if the borrower pays off the loan early.
  • Assistance is available from the VA to help borrowers avoid default.

VA loans, FHA loans, and other loans insured by departments of the United States government have securitization through the Government National Mortgage Association (GNMA), which is also known as Ginnie Mae. These securities carry the guarantee of the United States government.

 

TYPES OF VA LOANS:

The VA offers several types of mortgage loans to help veterans and their families. 

  • VA home purchase loans help veterans to buy a home at a competitive interest rate. Often these purchase loans do not require a down payment or private mortgage insurance. 
  • Cash-out refinance loans allow mortgage holders who are veterans to borrow against home equity to pay off debt, fund school or make home improvements. This refinancing option offers a new mortgage for a larger amount than the existing note and converts home equity into cash.
  • Interest rate reduction refinance loans (IRRRLs), also known as streamline refinance loans, help borrowers obtain a lower interest rate by refinancing an existing VA loan. This is a VA-loan-to-VA-loan process that allows homeowners to refinance a fixed loan at a lower interest rate or convert an adjustable-rate mortgage (ARM) into a fixed-rate mortgage.
  • The Native American Direct Loan Program helps eligible Native American veterans finance the purchase, construction or improvement of homes on federal trust land. Reductions in interest rates also come with these loans. 
  • Adapted housing grants help veterans with a permanent and total service-connected disability to purchase or build an adapted home or modify an existing home for their disability.