VA Loan Options
If you are serving in active duty military, or have received an honorable discharge from the military, a va loan may meet your mortgage needs. A va loan is not made by the VA itself, but a local lender that is part of the va loan program. The VA guarantees to pay the lender up to 50 percent of the principle if the borrower defaults on the loan. This makes a va loan attractive to the lender. For the borrower, there are also advantages like no downpayment, no mortgage insurance and competitive rates. There are several types of va loans available in today’s market.
The most obvious types are to purchase a home. This va loan allows people with qualifying income and credit to purchase a primary residence without putting any money down towards the sale price of the home. The sale price cannot exceed the appraised value of the home. Another option is a construction loan. Veterans building their own homes may a VA construction loan a great fit. With this program, the builder must be willing to carry all the cost of the constructed until the job is complete. The lender has the discretion (not the VA) to advanced determine if funds are advanced during the construction. Upon completion, the home must pass the VA inspection and appraisal to be guaranteed through the va loan program. An ARM, or Adjustable Rate Mortgage, is also a type of va loan that is available. These loans provide a fixed interest for three to five years, after which it adjusts up to one percent annually. The interest rate can raise or lower no more than five percent over the life of the loan. This type of loan’s rate will fluctuate over its life according to the one year Constant Maturity Index.
Refinancing is also available with a va loan. If a qualified VA lender offers a lower interest rate than on the current loan, you may wish to refinance to that lower rate. Refinancing a current va loan is dependent on the amount equity in the property. An owner may refinance up to 90 percent of the appraised value of the home and losing costs may be included loan. Another type of refinance loan is a VA streamlined loan. This loan requires less documentation and is generally used to reduce the interest rate on the loan. A appraisal is not required by the VA, but some lenders may. For this type of loan, credit reports or employment documentation are usually not required. When using a streamline loan, cash cannot be taken out of the property.
