web analytics

Different Types of VA Home Loans for Eligible Veterans

A qualifying veteran can take advantage of his VA loan benefits to purchase a new primary residence with no down payment or equity. VA loans allow a qualifying borrower to purchase a home with a zero down payment and 100% mortgage financing. However, one should note that realtors generally require that some amount be deposit in order to execute a binding sales contract with the seller on real estate transactions. VA home loans have the most flexible guidelines when it comes to downpayment requirements and seller-paid closing costs.

VA allows sellers to pay for almost all of the closing costs on the loans they guarantee. A seller can also pay up to 4% of any prepaid items required to secure VA financing. A buyer can avoid paying from out of pocket for any required prepaid items like escrows, buy-downs, debt, liens and funding fee this way.

The amount a borrower can finance through a VA guaranteed loan depends on the VA mandated loan limits for the area in which the residential property is located.

VA Mortgages for Primary Home Purchase

For most purchase transactions, VA loans allow a buyer 100% financing up to $417,000 in most areas of the nation. This VA determined maximum loan guarantee limit varies from location to location. So, one should consult the VA.gov website for latest guidelines related to loan limits for VA home loans in their locality.

For refinance transactions, VA allows qualifying veterans to refinance using the fast and flexible rate and term IRRRL streamline loan and also through other regular home loan refinancing programs. VA allows a borrower to tap 100% of the equity in their primary residence with a refinance loan. Cash-out VA refinance programs allow a borrower to draw cash-out to pay for debt relief, home improvement, discretionary use or paying of the VA mortgage’s closing costs and fees.

Even though Veterans Administrations loan programs allow for 100% financing, VA lenders may choose to have different underwriting requirements that may not permit financing up to the maximum VA limit.

VA Streamline IRRRL Refinance Home Loan

Veterans that just want to do a rate and term refinance without any cash-out can do so in a convenient manner through the VA guaranteed IRRRL loans. IRRRL loan guidelines restrict the situations in which a borrower can qualify for it.

The streamline VA mortgage refinance programs allow for both the refinance of an existing VA mortgage to a lower interest VA streamline loan and also from an adjustable rate loan to a VA-backed fixed rate mortgage loan. While an IRRRL loan allows for the closing costs to be included in the financing, no other cash out is permitted for any other purpose. Second mortgages, home equity loans and debt consolidation can be paid off through a streamline VA refinance loan. Due to this, the VA lender financing the streamline loan may require that the other liens and mortgages be subordinated to the first mortgage.

Energy Efficiency Costs

Any costs up to $6000 made to improve the energy efficiency of the residential dwelling can be included in any of the loan guaranty programs allowed by VA. For energy efficiency costs below $6,000, VA only requires the documentation of the improvements made, along with the estimated savings from doing them. When the costs exceed $6,000, an additional report to determine the valuation is also needed. VA mortgage energy efficient costs must be determined and included before the closing on the new refinance loan.

VA IRRRL loans limit the energy efficient costs through EEI loans to $6,000. Borrowers considering making major improvements related to energy efficiency for their home should consider other VA guaranteed mortgage refinance programs. As it’s not always easy to find a VA streamline lender that participates in the IRRRL EEI loans, one should consult the VA lender directory to research for a suitable lender.

VA loans are primarily limited to veterans seeking financing for the purchase or refinance of a residential property. Repairs and home improvement costs can be financed only through a standard refinance transaction.