Purchasing a home is a big step in a person's life. For a lot of people, it is one of the biggest accomplishments they will have. Even with all the excitement surrounding a home purchase, though, there is also a lot of fear involved. Everything from how much house you can afford to the type of loan you will get can cause the whole process to be quite stressful.
Luckily for military personnel the process is a little less complicated. The reason for this is VA loans. A VA loan is a home loan that is used to purchase a primary residence. These loans are available to all veterans, active military, National Guard members and reservists, as well as eligible spouses.
Benefits of a VA Loan
VA loans are a great perk of serving our country and they offer several benefits to those that qualify.
- Borrowers can get a loan with no money down unless the purchase price is greater than the assessed value of the home they are purchasing.
- Borrowers are not required to purchase private mortgage insurance.
- Because of VA guaranty, borrowers tend to receive more competitive rates than with any non-VA home loan.
- There are limits for how much closing costs can be on VA loans.
- Because the VA is backing all VA loans, lenders are required to assume a lot less risk. Because of this, VA loans tend to be easier to qualify for.
- The VA might be able to provide borrows with assistance if they have trouble making their payments.
The benefits that the VA provides are what allow a VA home loan to stand apart from most other types of loans. Since the housing crisis, it is virtually impossible to buy a house with no money down and no requirement for private mortgage insurance. The reason that lenders are able to do this is because the VA is willing to stand behind all VA loans. They are acting as the insurance on behalf of the borrowers.
Types of VA Loans
Now that we have discussed the benefits of having a VA loan, it's important to understand the three main types of VA loans that are available.
VA Purchase Loans
VA Purchase Loans allow veterans and their families, who meet certain income and credit requirements, to purchase a home. As mentioned earlier, these loans can be obtained with no money down in most instances.
VA Refinance Loans
As a homeowner, there might be a situation where you need to have access to cash. It could be that you are thinking about taking on a large home improvement project. When the need arises, you can choose to use a VA refinance loan so that you can get equity out of your home.
VA Streamline Refinance Loans
During a time when interest rates might be declining, you can refinance your home loan in order to lower your monthly payments. To do this, you would need a VA Streamline Refinance Loan, also known as an Interest Rate Reduction Refinance Loan.
With a VA Streamline Refinance Loan, you can lower the interest rate on your loan without incurring any out-of-pocket fees. Your lender can pick up the closing costs in exchange for a higher interest rate or you can opt to roll the closing costs into the balance of the loan.
If you use a VA Streamline Refinance Loan, then you can use your original document of eligibility, which means less paperwork and time to complete. Only those individuals with an existing VA loan are able to use a VA Streamline Refinance Loan.
If you are eligible for a VA loan, then they can be a great benefit to you when looking for a home loan. Not only will you receive very competitive rates, you will eliminate the need to have a large down payment.