If you are a U.S. Servicemember, Veteran or eligible beneficiary looking to buy a home, you may be wondering if there are any government programs to help you with your purchase. The U.S. Department of Veterans Affairs indeed offers assistance for several types of VA home loans. Read on to learn about their eligibility requirements and benefits.
Important to Note
It’s important to keep in mind that— with the exception of the Native American Veteran Direct Loan program—the VA itself doesn’t originate loans. Instead, you seek them out from private lenders like mortgage companies. Then, the VA guarantees a portion of the loan so that lenders can offer you more favorable options.
How Can VA Home Loans Be Used?
The most obvious use for VA home loans is to aid in purchasing a new home, but they also have several other uses. A few main options include:
- Building a home
- Making energy-efficient improvements to a home you already own
- Refinancing an existing VA-guaranteed loan or an existing mortgage loan
The VA also requires borrowers to have good credit, stable income, and a valid Certificate of Eligibility (COE). The VA has some baseline requirements for borrowers, such as having good credit and stable income, as well as a valid Certificate of Eligibility (COE).
The COE is simply a document that you present to a lender as proof that you’re eligible for the loan you’re applying for. You can apply for a COE online or through the mail, or your lender may even be able to apply on your behalf—be sure to ask them. For more information on applying for a COE, you can visit this page on the VA’s website: https://www.benefits.va.gov/homeloans/purchaseco_certificate.asp.
For Veterans and active-duty Servicemembers, factors like length of service/service commitment and duty status also play into eligibility for certain home loan programs. The VA’s Home Loans Eligibility page defines these service requirements and provides established dates for when you must have served in order to secure eligibility. The VA breaks these requirements down by service during wartime and peacetime. It also establishes that active-duty Servicemembers can become eligible after 90 days of continuous active duty.
Spouses of Veterans and other specific types of beneficiaries may also be eligible for VA home loans. You can also find information on these requirements on the VA’s Home Loans Eligibility page.
Types of VA Loans
Here’s a quick breakdown of the main types of VA loans:
VA-backed purchase loans can be attractive for a few main reasons. For one thing, they usually don’t require a down payment. Additionally, since these loans are guaranteed by the VA, lenders are willing to offer better terms and more competitive interest rates on them. And, unlike conventional loans, they don’t require private mortgage insurance. Use Top 10 Mortgage Brokers’ nationwide directory to find a lender near you who offers VA purchase loans.
Interest Rate Reduction Refinance Loan (IRRRL)
This is a really long name for an option that allows you to refinance an existing VA-backed home loan. An IRRRL can help you reduce your monthly mortgage payments by lowering your interest rate. Essentially, you’re replacing your existing loan with a new one that has different terms. Find more info about this program on the VA’s website here: https://www.va.gov/housing-assistance/home-loans/loan-types/interest-rate-reduction-loan/. You can also use Top 10 Mortgage Broker’s nationwide directory to find a lender near you who offers IRRRLs.
Cash-Out Refinance Loan
This is another refinancing option that allows you to take cash out of your VA-backed home loan equity in order to do things like finance home improvements or pay off debt. You can also use it to refinance a non-VA loan into a VA-backed loan. Like the above options, these loans are offered through private lenders. Visit this page on the VA’s website for more information: https://www.va.gov/housing-assistance/home-loans/loan-types/cash-out-loan/.
The takeaway: The VA backs several types of loan programs that can help Veterans, servicemembers and eligible beneficiaries with buying a home. You don’t have to be a first-time homebuyer to take advantage of these programs, and they can be a good option for those looking for lower interest rates. Since these programs are offered through private lenders, it’s important (as always) to shop around and do your research to make sure you pick a loan that’s right for you.
Disclaimer: These articles are intended for general informational purposes only and do not substitute the advice of qualified mortgage professionals. Please always consult your mortgage broker or loan officer when it comes to making decisions.