For members of the U.S. military, veterans, and their spouses, the Department of Veterans Affairs makes available a special mortgage program called the VA Loan Guaranty Program. Lockable as part of your VA benefits, the VA loan is a no-down payment, 100% mortgage available via any VA-approved lender of which there are many. VA mortgage rates tend to be “below-market”, too. As compared to conventional mortgage rates, VA rates are almost always cheaper; and, for loans with less than 20% down, the VA never charges mortgage insurance. You can save a lot of money with a VA mortgage, even when you’re making a down payment of twenty percent or more.
72 years ago, Congress conceived the VA Home Loan Guarantee program. Created as part of the Servicemen’s Readjustment Act of 1944, the program was meant to reduce “to the greatest extent possible” the sociological and economic problems of millions of post-war men and women who had served in the United States Armed Forces. The VA loan program was meant to be a cash bonus alternative; one which would not only be less expensive to the U.S. government, but would also better serve the needs of U.S. veterans who had be unable to establish a credit rating as non-veteran consumers had done in the 1930s and 1940s. The program was, and continues to be, a success. The zero-down payment, no-mortgage-insurance VA loan has helped military borrowers from San Diego, California to Fort Dix, New Jersey get access to below-market mortgage rates for more than seven decades. The VA loan remains among the most popular VA benefits for today’s armed services veterans and active personnel.
Since 1944, the VA home loan guaranty has been popular among veterans, service members and their families. According to the Department of Veterans Affairs, more than 20 million VA loans have been guaranteed since the program’s inception, nearly 300,000 per year. In recent years, though, low VA mortgage rates have been a boon to the VA Home Loan Guaranty program. More veterans are using the VA loan to buy homes, and the program’s unique Interest Rate Reduction Refinance Loan (IRRRL) program has been in high demand, too. Pronounced “Earl”, the IRRRL program is one of the fastest, simplest refinance programs homeowners can use for lower rates and payments. The VA guaranteed more than 629,000 home loans for U.S. military veterans in 2013 and now guarantees more than 1.7 million loans nationwide.
VA home loan benefits are available to many veterans of U.S. military service, active personnel, and surviving spouses, among others. There are minimum eligibility requirements to meet, which include verification of income and assets, and minimum service times. Minimum service times vary depending on whether you served during peacetime or wartime. For example, for individuals who served the U.S. military during World War II, the Korean War, and/or the Vietnam War, VA loan benefits are available after 90 days on active duty, or with a discharge under any condition other than dishonorable. By contrast, individuals who served during peacetime between 1947-1981 are required to show at least 181 days of continuous duty, and discharge under any condition other than dishonorable. For individuals with service-connected disabilities, minimum 90- and 181-day standards are waived in full.
VA loans aren’t just limited to armed services veterans, either VA benefits extend to certain members of the National Guard and Reserves; National Oceanic & Atmospheric Administration (NOAA) officers; public health service officers; and Air Force, Coast Guard, and military cadets. Surviving spouses who remarry after age 57 may be eligible for VA benefits, too.
Beyond the zero-down mortgage option, there are reasons why military borrowers like to use VA home loans when they purchase or refinance a home. One major benefit of using the VA loans is that the Department of Veterans Affairs waives mortgage insurance requirements every loan it guarantees. No matter your down payment, 0%, 10%, 20%, or more, you will never be asked to pay mortgage insurance when you use your VA benefits for a home loan.
Another major benefit of the VA mortgage is that all VA loans are assumable. When a loan is “assumable”, it means that your VA mortgage can be transferred to a future homebuyer if that person is also VA-eligible. Assumable loans can be a giant selling point in a rising mortgage rate environment. When you sell your home, your home’s buyer can buy your home and your mortgage, at its existing interest rate.
Furthermore, VA loans are simpler for which to qualify than other popular loan types. VA mortgage guidelines list no minimum credit score, no maximum VA loan size, and provide debt-to-income requirements which are often more loose than comparable FHA loans and conventional mortgages via Fannie Mae and Freddie Mac.
The benefits of a VA loan extend beyond its ease of underwriting. The Department of Veterans Affairs also makes available a number of “special” loan programs for all VA-eligible borrowers. Among the most popular VA loan program is the Interest Rate Reduction Refinance Loan (IRRRL). More commonly called the VA Streamline Refinance, the IRRRL is a VA-Loan-to-VA-Loan refinance. There are nearly no verifications required for a VA Streamline Refinance, and no home appraisal is required. The only major requirement of the VA Streamline Refinance is that you may not receive cash at closing.
The Department of Veterans Affairs also makes the following loan programs available to eligible borrowers:
- Construction Loans: The VA offers loans which military borrowers can use to finance the purchase and construction of a home.
- Energy Efficient Mortgages (EEM): The VA offers loans which allow buyers or existing homeowners to finance the costs of energy-efficiency improvements to a home
- Loans For Alteration or Repair: The offers loans which allow buyers or existing homeowners to finance home improvement costs into a mortgage
In addition, the Department of Veterans Affairs offers its Native American Veteran Direct Loan (NADL), which provides eligible Native American veterans and their spouses VA loans for homes on Federal trust land.
VA loans are popular because down payment and home equity requirements are low; because mortgage insurance is never required; and, because mortgage rates are often below-market.
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Purchasing a home with a VA Mortgage
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