What is a VA Loan Anyway?

If you are considering a home purchase you maypoints.
have asked yourself, "Why should I consider a VAThe IRRRL or Interest Rate Reduction Loan also
Loan. What is a VA Loan Anyway?" This article willknow as a VA Streamline is an opportunity for a
give you an overview of what a VA Loan is, thehomeowner with a current VA loan to refinance it at a
types of loans available and the advantages andlower interest rate.
basics of qualifying for such a loan.The VA Refinance provides an opportunity for a
The VA Loan became available as a result of the GIhomeowner to refinance from one VA Loan to
Bill. This bill was signed into law by President Franklinanother if there is equity in the home and the
Roosevelt in 1944. The purpose of the bill was tohomeowner wishes to pull cash out in the refinance.
create an opportunity for Veterans to take advantageAlso it is an opportunity for a homeowner in a current
of the American Dream of owning a home. The VAconventional loan to refinance to a VA Loan.
guarantee allows a NO down payment loan andThere are many advantages to a VA Loan. The main
protects the lender against a loss if for some reasonadvantage is that there are NO Closing Costs!
the borrower cannot repay the loan. The amount ofAdditional advantages are than no PMI (private
the guarantee is dependent upon the amountmortgage insurance) is required because the
borrowed and whether the veteran has usedgovernment guarantees the mortgage. This saves
entitlement on a previous loan. There are limits to themoney each month on the mortgage payment. Closing
loan amounts that qualify for a VA Loan. For examplecosts are limited and loan qualification is often less
A Veteran may be able to borrow up to $417,000 instringent than for other mortgage loans. There are no
most counties in the United States. In some countiesprepayment penalties and this loan is assumable. The
the limit may approach up to $1,000,000.VA also offers pre-purchase as well as financial
What types of Loans are guaranteed by thecounseling to veterans who may be in danger of
Veterans Administration?loosing their homes.
Purchase or VA MortgageThe basics of qualifying for a VA Loan are fairly
The VA Purchase Mortgage Loan is designed tostraight forward. The first step is to obtain a Veterans
provide a no down payment loan for a homeCertificate of Eligibility. Your Loan Officer can help you
purchase. A 30 year fixed mortgage is possible with afill out the paper work to obtain this. Other information
variety of pay back options. The most popularyou will need are identification such as birth certificate,
payment option is the common fixed payment optiondriver's license, social security card. You will also need
where the payment is stable unless the property taxto have copies of financial records such as checking
or homeowners insurance amount changes.and savings account amounts, current pay stubs and
The Hybrid ARM is an adjustable rate mortgage thatW2s for the past 2 years. You need to have a record
may be for a term of at least 3-5 or more years. Theof all open charge accounts and loans with the
annual adjustments are limited to 1% if the term is lessmonthly payment and account balances. Basically the
than 3 years and 2% if the period is more than 5information you will need to provide will help prove that
years with an annual cap of up to 5 percent.you are a solid credit risk and can afford the monthly
The Traditional ARM of 1 year is adjusted annually upmortgage payments.
to 1 percent with an increase limited to 5 percentage