VA Loan Guide

  • Christopher BrendanAuthor
  • 10.01.2014Date
  • Mortgage TypesCategory

VA Loan Guide

The VA helps service members, veterans, and eligible surviving spouses become homeowners. Their mission is to “Provide a home loan guaranty benefit and other housing-related programs to help [homeowners] buy, build, repair, retain or adapt a home for [their] own personal occupancy.” VA home loans are funded by private lenders like banks and mortgage companies. The VA is able to lower the overall cost of the mortgage loan by guaranteeing a portion of the loan, with this “insurance” lenders are able to provide buyers with more favorable mortgage loan terms.

There are a few different types of VA loans to choose from:

Purchase Loans: This type of loan helps you secure a competitive interest rate, and often doesn’t require you pay a downpayment or pay for private mortgage insurance.

Interest Rate Reduction Refinance Loan (IRRRL): This type of loan helps you secure a lower interest rate by refinancing your existing VA loan.

Native American Direct Loan (NADL) Program: This VA program helps eligible Native American Veterans finance the purchase, construction, or improvement of homes on Federal Trust Land, or reduce the interest rate on a VA Loan.

Adapted Housing Grants: These grants help veterans with “a permanent and total service-connected disability purchase or build an adapted home or to modify an existing home to account for their disability.”

The VA Home Loan Guaranty

You might be surprised to know that most VA Home Loans are managed entirely by private lenders, with the VA rarely getting involved in the loan approval process. Instead, the VA “insures” the loan by guaranteeing a portion of it. For example, if something were to go wrong, and the borrower is unable to make payments, the lending institution (bank, credit union, mortgage broker) would be able to go to the VA to cover any financial losses.

VA Home Loans: Advantages

The guarantee or “insurance” the VA provides lenders allows more favorable lending terms, such as:

  • No down payment as long as the sales price doesn’t exceed the appraised value.
  • No private mortgage insurance premium requirement.
  • VA rules limit the amount you can be charged for closing costs.
  • Closing costs may be paid by the seller.
  • The lender can’t charge you a penalty fee if you pay the loan off early.
  • VA may be able to provide you some assistance if you run into difficulty making payments.

You should also consider that:

  • You don’t have to be a first-time homebuyer.
  • You can reuse the benefit.
  • VA-backed loans are assumable, as long as the person assuming the loan qualifies.

Request a free VA Mortgage Loan Quote here now!

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