A VA loan doesn’t issue a loan, it’s a flexible and powerful lending option. Congress created, in 1944, the VA Loan Guarantee Program in order to help service member returning home the ability to have home ownership. The VA pledges to repay roughly a quarter of every loan and VA loan refinance, it guarantees if a borrower defaults. It protects the VA approved lenders when lending to those who served in the military. It often leads to very competitive terms and rates for qualified veterans. VA loans allow the borrow to purchase a home with no money down. There are less stringent underwriting standards, as well as, requirements with this type of loan than with conventional loans. They also don’t require that monthly expense of private mortgage insurance like conventional loan borrowers would be required to pay without placing a 20% down payment.
How Do VA Loans Work?
In order for a buyer to get a VA loan, they need to be qualified. A Certificate of Eligibility would need to be filled out. That along with a copy of their proof of service (DD214) would have to be submitted to their VA eligibility center. Once the VA issues the applicants certificate, the applicant can talk with a VA approved lender who can pre-qualify them for a VA loan. Once a home is ready for purchase by the buyer, the VA will do an appraisal through the lender, if the appraisal gets approved the buyer can then close.
How Can I Refinance A VA Loan?
The VA offers two VA loan refinance options. The Interest Rate Reduction Refinance Loan which provides streamlining for veterans to refinance their current VA mortgage. This program doesn’t allow the borrow to receive any monies at closing and requires the refinancing to save the borrow money. So long as there’s a benefit to the new loan and it doesn’t exceed the existing loan’s maximum, it’s not required to have an appraisal for VA loan refinance. The other, for VA loan refinance is the Conventional Rate and Term option. This option allows the veteran to change the loan terms and interest rate of their mortgage. This type of refinance allows the veteran to receive up to $2,000.00 back at closing. VA mortgages require the VA funding fee to be paid or financed by the veteran. Conventional loans don’t require this sort of loan guarantee or insurance provided the loan doesn’t exceed 80% of the value of the home.