VA Loans for Military Borrowers
Federally backed mortgage benefits help eligible military members as well as surviving spouses to finance homes. Additionally, disabled vets may qualify for grants from the VA to adapt their homes to their specific disabilities. Most vets with disabilities caused by injuries sustained in service will likely be eligible for a VA loan.
VA Loans: What You Need to Know
A VA loan is a mortgage loan in guaranteed by the United States Department of Veterans Affairs (the VA). The program was started in 1944 to help veterans returning home from World War II to acclimate back to civilian life.
The VA Loan program is for American veterans and military members currently serving in the U.S. military, reservists and select surviving spouses (provided they do not remarry) and can be used to purchase single-family homes, condominiums, multi-unit properties, manufactured homes and to finance new construction. These mortgages have competitive interest rates and usually require no down payment.
A VA loan, while guaranteed by the VA, is issued by a private lender such as a bank, credit union or mortgage company. The guarantee means that the government will repay the lender a portion of a VA loan if the borrower defaults on it, which in turn allows lenders to offer favorable terms to borrowers and to not require a down payment.
If you qualify, you can apply for a VA loan with whatever lender you please, as most – but not all – lenders offer VA loans, and some actually specialize in it.
Those who are typically eligible for a VA loan include active-duty military members or veterans who have served a specific length of time; if you’re the surviving spouse of a service member who died while on active duty and have not remarried; you meet the lender’s requirements for credit and income (the VA doesn’t set a minimum, but lenders can); and the property that you wish to purchase meets minimum safety codes and will be your primary residence.
There are several types of VA loans, from standard home purchase loans to loans that can accommodate very specific needs, including:
- A VA cash-out refinance, which is a new loan that replaces your current mortgage and taps into your home’s value, similar to a home equity loan but with the benefits of a VA loan.
- A VA IRRRL, or a streamline refinance loan, which can replace an existing VA loan with a mortgage offering a lower interest rate, or move from an adjustable-rate loan to one with a fixed interest rate.
- A VA renovation loan, which allows borrowers to purchase or refinance a home while rolling improvement costs into the mortgage.
- VA supplemental loans for home improvements can be added to an existing mortgage or included in a VA refinance.
- In addition, adapted housing grants help veterans with service-related disabilities buy, build or modify homes with specific upgrades that can assist with and improve their quality of life.
The VA also offers loans to Native Americans via the Native American Direct Loan program, which helps qualified individuals to buy, build, improve or refinance a home on federal trust land.
A VA loan offers many advantages over conventional loans and even U.S. Federal Housing Administration (FHA) loans for qualified military personnel. No down payment or mortgage insurance is required; competitive interest rates that are almost always lower than conventional or FHA loans; limited closing costs, as the VA limits the lender’s origination fee to no more than 1 percent and prohibits some other closing costs.
A VA loan is a resource that veterans and other military personnel and/or their spouses can use more than once if they meet certain conditions, including selling the initial house and paying off their VA loan or getting a qualified veteran buyer to assume the VA loan. In addition, there is also a one-time provision that allows borrowers to repay the VA loan and then get another VA loan to purchase another home.
A VA loan offers one of the best options in home financing and is specifically designed by the Federal Government to directly benefit veterans from their years of service in the military and should be explored for any eligible veteran who served or any surviving spouse of someone who died while on active duty.