Loan Programs Available for Veterans

After completing their military service, retirees very much look forward to their veteran housing loans provided by the Department of Veterans Affairs. These types of benefits help veterans reestablish themselves within civilian life.

Many former service members struggle to establish themselves financially once they get back, but there are numerous loans for veterans available to assist this process. A veteran’s home loan still requires a certain credit and income amount for the loan amount requested. However, VA loan benefits usually offer better terms than a veteran would receive from a traditional loan.

Housing loans for veterans can provide the capital necessary for a veteran to establish their daily lives once they return from service. A loan for a home can be requested from the Department of Veteran Affairs to help veterans build, buy, improve or refinance a home. Find out more about loan options, eligibility requirements and how to apply.

VA Home Loan Types

Veterans Affairs offers several home loan options for veterans. There are two types of loans offered, a direct VA home loan or a VA-backed home loan. When a veteran accepts a VA direct home loan, the Department of Veteran Affairs serves as his or her mortgage lender. In these cases, a veteran will work directly with the VA office to apply for and manage the loan. Currently, there is only one type of direct VA home loan available for veterans.

On the other hand, with a VA-backed home loan, Veterans Affairs guarantees a portion of the loan received from a private lender. This means that if a VA-backed home loan goes into foreclosure, the VA will cover some or all of the lender’s losses. Due to the decreased risk for lenders, VA home loan rates often have much better terms than traditional loans. In fact, almost 90% of these loans are made without a required down payment. There are presently three types of VA-backed loans available for veterans.

Veterans Home Loan Eligibility

In order to be considered eligible for a VA direct or VA-backed loan, you will need to show your lender a Certificate of Eligibility (COE). This certificate will show that you qualify for veterans home loans based on your service history and duty status. Certificates of Eligibility are offered to veterans and service members as well as National Guard and members of the reserve. Depending on when and where you served, there are different minimum service requirements to receive a COE. In addition to the COE, you must meet your lender’s credit and income requirements for the VA loan.

Veterans Housing Loan Options

After receiving your Certificate of Eligibility, you will need to decide which of the four types of loans fits your financial needs the best. Furthermore, some loans have additional prerequisites for eligibility. Find out more about each of the available VA home loan options.

Purchase Loan

A VA-backed purchase loan offers you better terms and interest rates than traditional loans from banks, mortgage companies or credit unions. Additionally, you can receive a purchase loan for a home without having a down payment. Since these loans are backed by Veterans Affairs, you also do not have to purchase private mortgage insurance. However, to be eligible you must live in the home you are buying with the loan in addition to having a COE and meeting your lender’s credit and income requirements.

Purchase loans for veterans offer a way to make home ownership more affordable and accessible. Show your lender your COE to prove that you are eligible for a veteran home loan. If you qualify, a VA-backed purchase loan can be used for many purposes including:

  • Buying a single-family home.
  • Buying a condo in an approved project.
  • Buying a home and make improvements.
  • Buying a manufactured home.
  • Building a new home.
  • Making your home more energy efficient.

Interest Rate Reduction Refinance Loan (IRRRL)

An Interest Rate Reduction Refinance loan will let you refinance your existing VA-backed home loan to reduce your monthly mortgage payments. If your current loan uses an adjustable or variable interest rate, an IRRRL can help make your monthly payments more stable. In order to get an IRRRL, you must go directly to a private lender with your Certificate of Eligibility. The terms and fees offered to you may vary by lender, so shop around in order to find the best option for you.

Cash-Out Refinance Loan

Cash-out refinance loans offer you another method of replacing your current housing loan with a new one under different terms. This VA home loan allows you to take cash out of your home equity or refinance a non-VA loan into a VA-backed loan. If you need cash to pay for school, pay off debt or any other reason, you can use a cash-out refinance loan to cash out on your home’s equity. A cash-out refinance loan also allows veterans who took out a home loan prior to their service to refinance with a VA-backed loan.

You will need to provide your lender with the following:

  • Your certificate of eligibility.
  • Copies of your most recent pay stubs.
  • W-2 forms from the last two years.
  • A copy of your federal income tax returns from the last two years.

Native American Direct Loan (NADL)

If you are a veteran, and either you or your spouse is Native American, you are eligible for a direct loan from the department of veteran’s affairs. This direct VA home loan can help you buy, build or improve a home on Federal Trust Land. You can also apply for a loan to refinance an existing NADL in order to reduce your interest rate. A NADL provides veteran’s with benefits such as:

  • No down payment requirement.
  • No private mortgage insurance requirement.
  • Limited closing costs.
  • A 30-year fixed mortgage with low interest.
  • Eligibility to receive another NADL in the future.

Similarly to other VA home loans, you must meet credit and income requirements and have a valid certificate of eligibility to apply for a NADL. Furthermore, your tribal government must have a Memorandum of Understanding with the Department Of Veteran’s Affairs describing how the program will be managed.

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