Learn About the Types of VA Home Loans
The Department of Veteran Affairs (VA) administers various types of benefits for qualifying veterans so they can acclimate to civilian life smoothly. One of the benefits that they provide includes housing loans. While there are different types of housing loans available, not all veterans will qualify for each.
Additionally, some of the loans may not be right for you. It is crucial to understand which loans are available to you and how each loan can affect your housing situation. In order to receive a thorough understand of some of the home loans the VA has to offer, continue reading the sections below.
About the VA Direct Loan: NADL Loan
If you or your spouse are a Native American veteran, then you may qualify for the Native American Direct Loan (NADL). This loan allows qualifying veterans to purchase, build or improve a home on Federal Trust Land. This is the only direct loan the VA offers, meaning that the VA will lend the loan to the eligible participant rather than the borrower finding a government-approved lender.
Some benefits that the NADL offers is no down payment or need for private mortgage insurance (PMI), which is commonly charged to borrowers getting conventional loans. There are also limited closing costs and a 30-year, low-interest-rate mortgage. It is also possible to receive another NADL for another residence, so long as you continue to meet the qualifications.
About the VA Loan Benefits of a Purchase Loan
For veterans who are looking for the same benefits as the NADL but do not meet the same main qualification, then the purchase loan is a viable option. This loan is a guaranteed loan, meaning that the VA will work with a VA-approved lender and back the loan.
When you are approved for this loan, you can build, purchase or improve your home and do not have to make a down payment. Furthermore, the lender also offers competitive interest rates since the loan is backed by the VA.
This loan also offers fewer closing costs and no penalty fee when you pay off the loan early. You can also use this loan to purchase your first home and use this loan again if you sell or refinance the home you bought with a VA-backed home loan.
About the VA Guaranteed Loan: Cash-Out Refinance Loan
This is another guaranteed loan from the VA that allows you to replace your current loan with a new one with different terms. You can take the cash out of your home equity to pay off debt, pay for schooling, make home improvements or any other needs you need to take care of. Additionally, you may refinance a non-VA loan and turn it into a VA-guarantee loan.
There is also no down payment, however, it is possible to borrow more when you place a down payment. There are also closing costs when you refinance the loan, so it is important to understand the value of your home. As with other loans, you may borrow up to the Fannie Mae/ Freddie Mac conforming loan limit. This will vary depending on the area you live in.
About the VA IRRRL Loan
The Interest Rate Reduction Refinance Loan (IRRRL) is loan is specifically for veterans who already have a VA-backed home loan. If you have a loan that you are paying too much monthly, then this loan may benefit you. This loan can help you lower your monthly mortgage payments by providing a lower interest rate. Furthermore, it can stabilize your payments every month by changing your adjustable and variable interest rate to a fixed interest rate.
The IRRL has no down payment and it is possible to borrow up until the Fannie Mae/Freddie Mac conforming loan limit. Another important detail to note is that if you a second mortgage on your home, your newly backed loan will be your first mortgage and your lender must agree to this.