The VA home loan program was part of the GI Bill of 1944. It served as a measure to aid military members returning after war to return to a normal civilian life. It also served as a bonus for service during wartime. VA (Veterans Administration) home loans are loans granted by banks or other private mortgage lenders that are partly guaranteed by the Veterans Administration.
This allows veterans of the US Armed Services to avail home loans under VA. It is estimated that nearly 29 million veterans and service personnel are eligible for home loan financing through VA. VA refinance home loans can be used to refinance an existing home loan. Our Guide to VA Home Loans will throw light on various aspects of this Government-backed loan.
VA Home Loan Guide
VA mortgage loans require no down payment. VA home loan rates generally follow the market rates. Loans are available up to 100% of the value of the property as established by VA. The closing costs and origination fees are limited by regulations. Such loans can be availed by veterans, active service members, and reservists as also members of the Public Health Service.
The guaranteed amount on any VA home loan is known as an entitlement. This is the amount that VA promises to pay the loan lender in case you default. Usually an entitlement of about $36,000 is given on a loan up to $144,000. The maximum entitlement for VA home loans over $144,000 is $60,000. VA home loan programs offer considerable leniency as far as debt ratios go. Nearly 41% of the borrower's monthly income can be taken for housing debt. Conventional loan lenders allow only up to 38%.
VA loan eligibility
Wartime veterans who have served at least 90 days in the World War II or the Korean War or the Vietnam Era or the Persian Gulf War are entitled to VA mortgage loans. Other personnel such as Reserves and National Guard and surviving spouses of eligible persons who died in service can also avail of VA home loans. The VA web site gives a complete picture on eligibility criteria as well as the documentation required.
VA home loan rate
VA home loan rates can be negotiated with the lender. Though first-time VA home loan takers are guaranteed a VA loan up to $240,000, the actual amount of the VA mortgage loan will depend on income, assets and credit history. VA mortgage loans can be assumed by buyers. You can opt for VA home loans at rates that are adjustable.
Adjustable rate mortgages or ARMs from VA can be availed for a 3 year or 5 year term. This is ideal for those who do not plan to stay in the house for a long period. Variable VA home loan rates can save you money if you do not have long-term interests in the house. Prepayment on VA mortgage loans does not attract penalty.
VA loans can help you fund the purchase of an existing single-family home or new construction of residence. You can avail VA home mortgage loan to refinance or undertake home improvement. VA loan financed homes may be put up for auction in cases of foreclosure. War veterans and others can bid for the property that may be available at an attractive price.
VA home loan refinance
VA home loan refinance can be done in a number of ways:
VA Streamline refinance of home loan: You can refinance your existing VA home loan with a lower rate loan by using a VA IRRRL (Interest Rate Reduction Refinancing Loan). This type of VA home loan refinancing allows you to avail of lower interest rates sans any out-of-pocket closing costs.
Cash out refinance of VA home loan: Cash out refinancing on your VA home loan can be done if you have built sufficient equity on your home. You can avail up to 90% of the value of your home to pay off debts. alternatively, you can use VA refinance loan for home improvement.
Conventional to VA refinance of home loan: This type of home loan refinancing can be done if you want to move from a conventional mortgage to a VA mortgage loan. A funding fee of 2.2% is charged for insuring the loan, if you are availing the VA home mortgage loan for the first time. By resorting to this form of VA home loan refinance, you can save on the monthly mortgage insurance.
VA loan for home improvement
Home improvement loan from VA can help you finance expensive renovation plans. Installation of energy-related features such as heating or cooling systems, caulking, storm windows or other energy-efficient systems. Home improvement VA loan is slated not to be more than 90% of the cost of the improvement plans.