Are you eager to buy a home? Is your heart set on a fixer-upper? If you’re a current homeowner, does the idea of refinancing your current mortgage appeal? If you’re eligible to participate in the U.S. Department of Veterans Affairs’ home loan program, a VA loan might be the perfect way to achieve your housing goals. There are several types of VA loans available, so it’s easy to find one tailored to your needs.
The Types of VA Loans
The VA’s home loan program is intentionally designed to help service members and veterans become homeowners. These loans aren’t available to everyone. While borrowers must demonstrate that they have the financial means to take on their requested loan, eligibility is about more than income and credit scores. It begins with service. Service members, veterans, and other qualifying parties who fulfill the eligibility requirements have access to several different types of VA loans.
VA Purchase Loans
When people talk about VA loans, they’re often referring to VA purchase loans. These popular loans allow borrowers to buy, build, or improve a home that will serve as their primary residence. They can also be used to purchase a condo or multi-family home with up to four units. Made by private lenders and guaranteed by the VA, these loans offer borrowers significant advantages:
- Borrowers enjoy excellent interest rates and loan terms because the government backing reduces a lender’s risk.
- There’s no loan limit. You can borrow up to the conforming loan limit without a down payment. With approval, you can borrow more by making a down payment.
- No down payment is required as long as the home’s appraised value is equal to or greater than its sale price.
- Credit requirements for borrowers are relaxed, so it’s easier to get approved.
- No mortgage insurance is necessary.
- Closing costs are limited.
VA Renovation Loans
A VA renovation loan is a purchase loan or cash-out refinance loan that includes additional funds for the specific purpose of renovating a property. You’ll be able to secure both the purchase price and up to 25 percent of the home’s “as completed” value in renovation funds, and you’ll do so with just one loan and one monthly mortgage payment. The work must be approved and completed by a licensed contractor within 90 days of closing.
VA Cash-Out Refinance Loans
Are you a homeowner interested in trading your current mortgage for one with different terms? Refinancing is the way to do just that, and a VA cash-out refinance loan offers homeowners who are interested in cashing in on their home’s equity a way to do so. It’s also an option for qualifying homeowners who have some other type of mortgage and want to swap it for a VA loan. To qualify for a VA cash-out refinance loan, you have to be eligible to participate in the VA loan program, meet the standards set by the VA and your lender for income and credit, and plan to use the home that you’re refinancing as your primary residence.
VA Interest Rate Reduction Loans
If you already have a VA loan and want to snag a lower interest rate, a VA Interest Rate Reduction Loan (IRRRL) may be the perfect solution. This type of VA loan can also come in handy for borrowers craving stability who want to switch from a VA loan with an adjustable rate to one with a fixed rate. Sometimes called streamline loans because they generally require less paperwork and time than other refinances, IRRRLs can only be used to refinance an existing VA loan. You cannot cash out any home equity, and the home covered by the loan must be either your current or former primary residence.
Each of these types of VA loans comes with its own advantages and requirements. How do you know which one is right for your situation? At PrimeLending Twin Cities, we’re loan experts. Putting our expertise to work for you would be our pleasure. If you’re interested in a VA loan, contact us today to learn how you can make the most of the housing benefits.