Military veteran homebuyers (including surviving un-remarried spouses), both new and experienced, have quite a few options when it comes to securing a loan to purchase their house, townhouse, or condo. Perhaps an overlooked choice is the Veteran Affairs, or VA, Loans, a loan financed by the U.S. Department of Veteran Affairs. These loans are worth considering, as they provide some benefits, which may be the right fit for you or someone you know.
First, there’s no down payment so long as the sales price is lower than the appraised value. They offer competitive terms and interest rates as compared to other loan options. VA loans have no cap on how much can be borrowed, have fewer closing costs— which may even be paid by the seller— and no penalty for paying the loan off early.
Additionally, private mortgage insurance (PMI) or mortgage insurance premiums (MIP) are unnecessary. PMIs protect the lender in the event a mortgage cannot be paid and is typically required on conventional loan choices when the down payment is less than 20% of the total mortgage amount. Meanwhile, an MIP is what the FHA (Federal Housing Administration) requires to self-insure against a future FHA loan loss.
To be eligible for a VA loan, one needs to qualify for a VA-backed home loan Certificate of Eligibility (COE); meet the designated standards for credit, income, and anything else the seller requires; and the buyer must live within the home the loan is being used to purchase. Once qualified, buyers can purchase a single-family home (up to four units); a condo in a VA-approved building; a home with the goal of improving it; a manufactured home or lot; build a new home; make more energy-efficient upgrades, such as solar panels.
VA loans are a great way to buy a first home, use the VA loan benefit to get a secondary loan, or even assume an existing VA-backed loan, meaning the buyer would take over the seller’s loan in favor of opening a new mortgage loan.
But veterans have even more loan possibilities through VA loans. There’s the VA IRRRL, or Veteran Affairs Interest Rate Reduction Refinance Loan, which can lower monthly mortgage payments through obtaining a lower interest rate. It can also allow moving from an adjusted variable interest rate (one that changes over time) to a fixed rate (one that stays steady over the life of the loan. To qualify for the VA IRRRL, all that’s required is to already have a VA loan, to use IRRRL to refinance said VA loan, and the ability to confirm the home covered by the loan is one currently or previously lived in.
Finally, through a VA loan, borrowers can take cash out of the value of their property for renovation projects, education funds, debt consolidation, or other approved reasons. To cash out from the mortgage, homeowners just need to have a VA-backed COE, live in the home being refinanced with the loan, and meet the VA and lender’s credit, income, and any additional standards.
To see how your current loan specs could change with a VA loan, click here to use Geneva’s interactive mortgage calculator. When you’re ready to make a loan change, reach out to your local mortgage loan officer.