If you’re a military member, Veteran, or eligible surviving spouse looking to buy a home, the types of VA loans available to you can seem overwhelming. VA loans offer benefits such as lower interest rates and no down payment requirement, but there are different types of VA loans that can be used for different purposes. In this blog, we’ll break down the types of VA loans and why it’s important to work with an independent mortgage broker.
What is a VA Loan?
A VA loan is a type of home loan available to current and former military service members, as well as certain surviving spouses. VA loans are designed to make homeownership more accessible to those who have served our country, by providing them with more favorable loan terms and reduced costs.
Unlike conventional home loans, VA loans are guaranteed by the Department of Veterans Affairs (VA), which means that lenders have less risk in offering these loans. This can result in more flexible eligibility requirements and lower interest rates for borrowers.
VA loans can be used to purchase a new home, refinance an existing home loan, or make necessary home improvements. These loans are an excellent option for military families who want to become homeowners or those who need assistance with refinancing an existing loan.
Overall, a VA loan can help you achieve your dreams of owning a home while also providing you with important benefits and protections that you won’t find with other loan options. If you’re a military service member or Veteran looking to buy a home, a VA loan could be an excellent choice for you. VA loans are designed to provide financial assistance to military personnel who may face challenges in securing a traditional mortgage. With a VA loan, eligible borrowers can obtain 100% financing for their home purchase without having to make a down payment. This feature is particularly beneficial for military families who may not have significant savings or may be relocating frequently. VA loans also offer competitive interest rates, which can save borrowers thousands of dollars over the life of their loan. Additionally, VA loans do not require private mortgage insurance, which is typically a requirement for conventional loans with less than 20% down payment. All in all, a VA loan provides unique advantages that can help military personnel achieve their homeownership goals. If you are eligible for a VA loan, it is important to understand the different types of VA loans available.
Types of VA Loans
As a Veteran or an active-duty military member, you have access to a range of benefits, including the types of loans for Veterans known as VA home loans. VA loans are designed to help Veterans and active-duty military members purchase, refinance, or adapt their homes. Below are the most common types of VA loans.
- VA Purchase Loan
A VA Purchase Loan allows Veterans and active-duty military members to buy a home with no down payment. This type of VA loan has flexible credit requirements and lower interest rates, making it easier for military members to achieve homeownership.
- VA Cash-Out Refinance Loan
With a VA Cash-Out Refinance Loan, military members can refinance their home and receive cash back. This can be an excellent option for Veterans who need funds for home improvements, debt consolidation, or other financial needs.
- VA Interest Rate Reduction Refinance Loan (IRRRL)
A VA IRRRL allows Veterans and military members to refinance their current VA loan to obtain a lower interest rate. This type of loan doesn’t require an appraisal or credit check, making it an easy and fast option for those who qualify.
- VA Native American Direct Loan (NADL)
The VA NADL is designed for Native American Veterans who wish to buy or build a home on Federal Trust Land. This loan offers low interest rates and requires no down payment or private mortgage insurance.
- VA Adapted Housing Grants
For Veterans with disabilities, the VA offers Adapted Housing Grants to help with the cost of modifying or purchasing an adapted home. These grants are available to Veterans with a service-connected disability that affects their mobility, vision, hearing, or other abilities.
VA Purchase Loan
The VA Purchase Loan is designed to help eligible Veterans, service members, and surviving spouses purchase a home. This type of loan can offer many benefits, including competitive interest rates and no down payment requirement.
One of the types of loans for Veterans is the VA Purchase Loan. It’s specifically designed to help eligible individuals buy a home with flexible financing options and no down payment requirement. Unlike traditional loans, the VA Purchase Loan is backed by the Department of Veterans Affairs, which means lenders are more willing to approve the loan with favorable terms.
Benefits
With a VA home loan, you don’t need to save for a down payment, which can be a significant barrier for many people. Additionally, the loan has flexible credit requirements, which can make it easier to qualify than other types of loans.
Another benefit of VA home loans is that they often have more lenient underwriting requirements. This means that lenders may be willing to approve loans for borrowers with lower credit scores or less established credit history.
Eligibilty
When applying for a VA Purchase Loan, you’ll need to provide a Certificate of Eligibility (COE) from the VA. This document confirms that you meet the eligibility requirements for the loan.
Good Option for:
VA Purchase Loans are an excellent option for Veterans and active-duty service members who want to buy a home with competitive interest rates, flexible financing options, and no down payment requirement.
VA Cash-Out Refinance Loan
If you already own a home and have a VA loan, you may be able to take advantage of a VA cash-out refinance loan. This type of loan allows you to access the equity in your home by refinancing your existing mortgage and taking out a larger loan. The additional funds can be used for a variety of purposes, such as home improvements, paying off debt, or covering major expenses.
As with any financial decision, it’s important to consider the potential drawbacks of a VA cash-out refinance loan. Taking out a larger loan will mean a longer repayment period and more interest paid over time. It’s important to weigh the costs and benefits before deciding whether this type of loan is right for you.
Benefits
One key benefit of a VA cash-out refinance loan is that the interest rates are typically lower than those for other types of loans. Additionally, there is no requirement for private mortgage insurance (PMI), which can save you money on monthly payments. Keep in mind that if you are refinancing a non-VA loan, you will need to meet certain requirements in order to be eligible for this type of loan.
Eligibility
To apply for a VA cash-out refinance loan, you will need to have a good credit score and sufficient income to repay the loan. You will also need to undergo a home appraisal to determine the current value of your property. Keep in mind that the maximum loan amount for this type of loan is generally up to 100% of the value of your home.
Good Option for:
Overall, a VA cash-out refinance loan can be a great option for homeowners who need to access their home equity for major expenses.
VA Interest Rate Reduction Refinance Loan (IRRRL)
If you currently have a VA loan, the Interest Rate Reduction Refinance Loan (IRRRL) may be a good option for you. Also known as a Streamline Refinance, the IRRRL allows you to refinance your existing VA loan into a new one with a lower interest rate and monthly payment.
Benefits
One of the main benefits of the IRRRL is that you can refinance without having to go through the full underwriting process again. This means less paperwork and faster processing times. However, it’s important to note that the IRRRL can only be used to refinance a VA loan. Additionally, you cannot receive cash back with this type of loan.
Eligibility
To qualify for the IRRRL, you must currently have a VA loan and be up-to-date on your mortgage payments. You also cannot refinance a loan that is more than 30 days past due.
Good Option for:
Overall, the IRRRL can be a great option for homeowners looking to save money on their monthly mortgage payment without going through a lengthy and complicated process. Be sure to talk to your independent mortgage broker to see if this type of loan is right for you.
VA Native American Direct Loan (NADL)
The VA Native American Direct Loan (NADL) is a unique loan program designed to help Native American Veterans buy, build, or improve homes on Federal Trust Land. Trust Land is land that belongs to the federal government and is held in trust for Native American tribes.
Benefits
The NADL program offers up to $417,000 in loan funds, with no down payment required. Interest rates are fixed and typically lower than those offered by traditional lenders. Borrowers can use the funds to purchase a home, build a home, or improve an existing home.
Eligibility
To be eligible for the NADL program, you must be a Native American Veteran, have a valid Certificate of Eligibility, and meet certain income requirements. You must also be a member of a federally recognized tribe, or your spouse must be a member of a federally recognized tribe.
If you’re interested in the NADL program, it’s important to work with an experienced mortgage broker who understands the program and can guide you through the process. An independent mortgage broker can help you determine if you’re eligible for the program, assist you with your application, and help you find a lender who offers the NADL program. Find out if you qualify for a NADL.
Good Option for:
The VA Native American Direct Loan (NADL) is a great option for Native American Veterans who want to buy, build, or improve a home on Federal Trust Land. If you’re interested in the NADL program, be sure to work with an experienced mortgage broker who can guide you through the process and help you find the best possible rates and terms for your loan.
VA Adapted Housing Grants
In addition to the various VA loan options available, the Department of Veterans Affairs also offers adapted housing grants for qualifying Veterans with permanent and total service-connected disabilities. These grants are designed to help Veterans modify their homes to better meet their needs and increase their independence.
Benefits
There are two types of adapted housing grants available: the Specially Adapted Housing (SAH) Grant and the Special Home Adaptation (SHA) Grant. The SAH Grant provides up to $100,896 in funding for Veterans to build, remodel, or purchase a home that meets their specific disability-related needs. The SHA Grant provides up to $20,215 in funding for Veterans to adapt an existing home they already own or are planning to purchase.
Eligibility
To be eligible for these grants, Veterans must have a service-connected disability rating of 100 percent and must have experienced a loss of or loss of use of both arms, both legs, or one leg and one arm. They must also have a permanent and total disability that affects their ability to live independently.
If you are a qualifying Veteran interested in applying for one of these grants, you will need to submit an application to the VA. The VA will then assess your eligibility and determine the amount of funding you may receive. It’s important to note that these grants do not have to be repaid and can only be used for specific housing-related purposes.
Good Option for:
The SAH and SHA Grants are ideal for Veterans with permanent and total service-connected disabilities who require modifications to their homes to increase their independence. These grants can help eligible Veterans make necessary adaptations to their homes to improve accessibility and functionality. The SAH Grant is specifically intended for Veterans with significant physical disabilities, while the SHA Grant is for Veterans with less severe disabilities. Regardless of which grant Veterans may be eligible for, both grants can significantly improve their quality of life and ability to live independently.
Working with an Independent Mortgage Broker
When it comes to financing your home, it’s important to work with someone who has your best interests in mind. That’s where an independent mortgage broker comes in. Unlike loan officers who work for a specific lender, independent mortgage brokers work with a variety of lenders to find the best loan options for you.
An independent mortgage broker can help you navigate the complex world of VA loans and adapted housing grants, ensuring that you understand all of your options and can make informed decisions about your financing. They can also help you identify any additional resources or benefits that you may be eligible for, such as local or state-specific housing grants.
At the end of the day, an independent mortgage broker can be a valuable ally for any Veteran looking to finance a home or adapt their current home to better meet their needs. With their knowledge, expertise, and commitment to serving their clients, you can rest assured that you’re getting the best possible financing options for your situation.
