VA Loans
A VA loan is a mortgage loan that is guaranteed by the U.S. Department of Veterans Affairs. (VA) and is available to eligible service members, veterans, and surviving spouses. The VA loan program was part of the GI Bill of Rights of 1944, designed to help those eligible purchase or refinance a home with more favorable terms and conditions than those of conventional loans.
Benefits of VA Loans
VA loans offer several benefits to service members, veterans, and surviving spouses. Here is a list below of some of the top benefits:
- No down payment required: VA loans do not require a down payment. This makes it considerably easier for eligible applicants to purchase a home.
- Lower interest rates: VA loans are backed by the government and therefore are offered at lower interest rates than conventional loans. These lower interest rates translate into a lower monthly payment and significant savings over the life of the loan.
- Flexible credit requirements: The VA requirements for approval are much friendlier than you will find for your typical conventional loan. What this means is that if you have less than perfect credit, that is ok, you can still qualify for a VA loan.
- No private mortgage insurance (PMI): Va loans do not require PMI, unlike conventional or FHA loans. This equates to a lower monthly payment and saves the borrowers thousands over the life of the loan.
- Streamlined refinance options: VA loans are some of the easiest loans to refinance when it is time to reduce your payment or take some of the equity out of the home; no income, credit checks, or appraisal in some cases. These are truly low-cost options for helping veterans, service members, and surviving spouses.
In summary, a VA loan is a mortgage loan that provides numerous benefits to service members, veterans, and surviving spouses including no down payment, lower interest rates, no PMI, and more flexible credit and income requirements. These benefits can and do make homeownership more accessible and affordable for those who have served our country. Not sure if you qualify? Talk to an expert and we can help you verify your benefits with the VA.
VA Refinancing - VA Cash Out Loan
Already have a VA Loan and considering refinancing? Let’s explore your options . . . VA Cash Out
VA Cash-Out loans are a type of mortgage refinancing option that allows homeowners to refinance their existing VA loan and extract some of the equity from their home’s value. Thus, they are taking out a new loan at a higher amount than what they currently owe.
Here are some of the pro’s and cons to consider with a Cash Out:
Pros:
- Access to cash: The single largest benefit. Use your cash for what you need, it is yours after all. Are you wanting to do some home improvements, debt consolidation, pay off education bills, need an emergency fund, or a combination of these? Using your equity is a way to make those things happen.
- Lower your interest rate: VA cash-out loans often come with a lower rate than the traditional conventional or FHA loan, making them a more affordable option than simply getting a loan from your bank or taking out a HELOC.
- No mortgage insurance: Still no PMI, even when taking your loan amount up, the VA does not require private mortgage insurance.
- No out-of-pocket expenses: The VA allows borrowers to roll the closing costs of the loan, including title/escrow work, taxes from the county, etc. into the loan amount. What that means is nothing out of pocket on signing day.
- Funding fee can be financed: Yes, the VA still charges a funding fee, although it is a reduced percentage vs that from a VA purchase loan. If the borrower is receiving
Cons:
- Longer repayment terms: VA cash-out loans often come with a longer repayment term, which can mean the borrower is paying for their property and loan length.
- Increased debt: It stands to reason, if the borrower is taking cash out, they now have an
- Increased loan amount: In the end, this means a higher payment. Working with your loan officer, and financial planner, and staying within your budget is always of primary importance. Before you move forward with a cash-out, ensure you will be able to afford your new payment comfortably.
- Closing costs: Although the borrower can push these fees into the new loan, they are still responsible for paying them. Closing fees can be up to a couple of thousand dollars. Weigh the benefits of taking a cash-out vs the cost.
- Minimum credit score requirements: these vary from lender to lender.
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Is there a funding fee for doing a Cash Out Loan?
Yes, the funding fee is .5% for Cash-out and borrowers can roll the VA funding fee into the loan balance. Homeowners who receive compensation for a service-related disability and qualified surviving spouses are exempt from the funding fee.
VA Streamline Refinance, Interest Rate Reduction Refinance Loan (IRRRL)
A VA IRRRL, also known as a Streamline Refinance, is a type of mortgage available to eligible veterans and active-duty military personnel with existing VA home loans. The primary goal of a VA IRRRL is to provide these borrowers with the best streamlined refinance options available to reduce their monthly payments and/or reduce their interest rates.
It is referred to as a Streamline because it typically requires less paperwork and is completed in less time than your average conventional loan refinance.
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Is there a funding fee for doing an IRRRL?
Yes, the funding fee is .5% for IRRRLs and borrowers can roll the VA funding fee into the loan balance. Homeowners who receive compensation for a service-related disability and qualified surviving spouses are exempt from the funding fee.
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