The Ins and Outs of VA Loans
Realtypin.com Author: James Paffrath
May 07, 2013
If you are Active or Retired Military and considering purchasing a home, one type of financing you should look into is the Veterans Affairs loans (or “VA loans”), which can be issued by qualified lenders. This type of loan is intended for American veterans, or their surviving spouses, to help them purchase a home or provide a second mortgage.
This type of loan has much better benefits than traditional loans. Many times, the loan amounts are much higher than that person would normally qualify for with a Fannie Mae or conforming loan. With a VA Loan, the monthly payment can be close to half of the person’s monthly income, instead of the typical quarter of the monthly income. Furthermore, these types of loans usually not require any down payment or a limited down payment to qualify.
How do you know if you’re eligible?
These loans are intended for American veterans who meet a minimum time of completed service. The VA doesn’t specifically require a minimum credit score to pre-qualify for a VA loan. However, most lenders do require a minimum credit score, regardless of the veteran’s status.
What about purchase loans and cash-out refinancing?
You’ll usually see these terms mentioned alongside VA loans, so let’s go over each one…
A purchase loan is a loan offered to veteran that doesn’t require mortgage insurance or a down payment. With the cash-out refinancing option, a veteran can take equity out of their home for certain things – like paying for their children’s college tuition, home renovations, or paying off debts. To qualify for these types of loans, the veteran must have an appropriate credit score, as well as proof of sufficient income.
What about an interest rate reduction refinance loan?
You’ll also see this type of loan talked about in conjunction with VA loans. The interest rate reduction refinance loan is open to Veterans with a current VA loan. It allows them to refinance and receive a lower rate (if they’re eligible). This type of loan can only be applied against a current VA Loan on the original property that the loan was provided to finance.
So, what’s a Native American direct loan?
If you’re a Native American veteran, you’ll hear buzz about this option, too. This type of loan is for Native American veterans to purchase or build on Federal Trust Land. This type of loan can also be used to get a better rate on a current VA Loan. To qualify, you must be a Native American Veteran serving a minimum amount of time in the military. Furthermore, your tribe must be a participant in the program.
What are adapted housing grants?
This type of loan is provided to Veterans who need to make changes to their current home or to purchase a home with specific needs related to a disability. These types of loans can be used for things like wheelchair ramps or other improvements to aid in the living of a veteran who has suffered a disability. To be eligible for this type of loan, you must have had sustained a permanent or a certain total disability that is directly correlated to your military service.
If you are active or retired military and are thinking about purchasing your first home or refinancing your current home, your first stop should be to a VA loan calculator to find out if you qualify for these loans. In the end, you could wind up with a much more affordable mortgage!