A VA loan is a mortgage loan in the United States guaranteed by the U.S. Department of Veterans Affairs (VA). The loan may be issued by qualified lenders.
The VA loan was designed to offer long-term financing to eligible American veterans or their surviving spouses (provided they do not remarry). The basic intention of the VA direct home loan program is to supply home financing to eligible veterans in areas where private financing is not generally available and to help veterans purchase properties with no down payment. Eligible areas are designated by the VA as housing credit shortage areas and are generally rural areas and small cities and towns not near metropolitan or commuting areas of large cities.
The VA loan allows veterans 103.3 percent financing without private mortgage insurance or a 20 percent second mortgage and up to $6,000 for energy efficient improvements. A VA funding fee of 0 to 3.3% of the loan amount is paid to the VA; this fee may also be financed. In a purchase, veterans may borrow up to 103.3% of the sales price or reasonable value of the home, whichever is less. Since there is no monthly PMI, more of the mortgage payment goes directly towards qualifying for the loan amount, allowing for larger loans with the same payment. In a refinance, where a new VA loan is created, veterans may borrow up to 100% of reasonable value, where allowed by state laws. In a refinance where the loan is a VA loan refinancing to VA loan (IRRRL Refinance), the veteran may borrow up to 100.5% of the total loan amount. The additional .5% is the funding fee for an VA Interest Rate Reduction Refinance.
VA loans allow veterans to qualify for loan amounts larger than traditional Fannie Mae / conforming loans. VA will insure a mortgage where the monthly payment of the loan is up to 41% of the gross monthly income vs. 28% for a conforming loan assuming the veteran has no monthly bills.
The maximum VA loan guarantee varies by county. As of 1 January 2012, the maximum VA loan amount with no down payment is usually $417,000, although this amount may rise to as much as $1,094,625 in certain specified “high-cost counties”.
The VA loan program can make it much easier for veterans to secure a home than with other loan solutions. This program is available to veterans and guaranteed by the U.S. Veteran’s Administration. Frequently VA loans offer lower interest rates than conventional financing. In addition, with a VA-guaranteed loan, there is no private mortgage insurance requirement, which saves you even more money each month.
Highlands Residential Mortgage, LTD. proudly offers government-backed VA loans for veterans. These loans have many advantages over other types of loans, which I have outlined below:
- Available to veterans, reservists, active-duty personnel, and surviving spouses of veterans, based on military entitlement
- No down payment
- No cash reserves
- No application fee
- Seller is required to pay certain closing costs, decreasing the closing costs for the borrower
- May pay off some consumer debt with the refinance loan program
- 1-4 unit primary residences may qualify with restrictions
Up to 100% financing (based on VA lending limits) may be available for purchase loans and up to 90% for cash-out refinances. Gift funds or bond programs for down payment and closing cost assistance are allowed.
HRM also offers the VA Interest Rate Reduction Refinance (IRRRL) loan program. With this veterans-only refinance, the interest rate on an existing VA loan may be reduced significantly!