The VA home loan program has a long and successful history of helping United States veterans find and purchase homes. If you’re a veteran living in California, the VA Home Loan Program can help you with finding a loan, learning about VA loan guidelines, and purchasing the home that meets your needs, now and for the future.
A Brief Background of the VA Home Loan Program
The VA Home Loan Program was founded in 1944 as part of the Servicemen’s Readjustment Act, better known as the GI Bill. It was intended to make it easier for veterans or their surviving spouses to secure the funding needed to purchase a home. Additional legislation passed over the years expanded the scope of the VA Home Loan Program and erased some VA loan restrictions, such as terminating application dates, allowing loans to cover mobile homes, and expanding benefits to cover Reserve and National Guard personnel, according to an article by Clayton Closson on the website Military.com.
The Purpose of a VA Home Loan
VA home loans are mortgage loans made to U.S. military veterans. The loans are guaranteed by the U.S. Department of Veterans Affairs, commonly known as the VA. The program, as defined in the VA Home Loans section of the U.S. Department of Veterans Affairs website, helps active duty service members, veterans, and eligible surviving spouses purchase, build, repair, retain, or adapt a home for personal occupancy.
VA loans are made by private lending institutions, such as banks or mortgage companies. Portions of the loans are guaranteed by the VA, which allows banks greater freedom in making loan decisions. The main advantage to borrowers who use the VA loan program is the lack of requirement for a down payment. In addition, borrowers can have the seller pay all closing costs. Keep in mind, however, that there is a VA funding fee that can add costs to the loan.
Types of VA Loans
There are four main types of VA Home Loans.
- Purchase loans: These types of loans give veterans the opportunity to purchase homes without a down payment. Since the initial investment is often the biggest obstacle to home ownership, the option to buy without a down payment makes VA loans one of the best options for veterans. Purchase loans can also be made at a more favorable competitive interest rate. In this same category are cash out refinance loans that allow homeowners to take cash out of their home equity for purposes such as paying off outstanding debts, financing education, or making home repairs or improvements.
- Interest Rate Reduction Refinance Loans (IRRRL): These are sometimes referred to as Streamline Refinance Loans. Their main benefit is that they allow homeowners to secure a lower interest rate by refinancing an existing VA loan.
- Native American Direct Loans (NADL): These loans help eligible Native American veterans pay for the purchase, construction, or improvement of homes that exist on Federal Trust Land. These types of loans can also be used to reduce the interest rate on a current VA loan.
- Adapted Housing Grants: These are available for veterans with permanent and total service-connected disabilities. They help veterans buy or build an adapted home or modify an existing home to accommodate their disability. For example, they could be used to buy a home that has been adapted for a person with mobility limitations, or for adding features such as wheelchair ramps or indoor lifts. VA loan restrictions apply to the type and extent of disability required to qualify for this type of financial assistance.
Basic Requirements for VA Home Loans
- Qualifications: Keep in mind that VA loan conditions may apply when you are looking for a home loan. For example, the type of loan you qualify for may be affected by the length of time spent in service or the current length of a service commitment The character of your military service (that is, whether you served honorably) and your duty status may also influence loan availability.
- Certificate of Eligibility (COE): Some VA loan programs require that the lender possess a Certificate of Eligibility. The COE certifies to a lender that you are eligible for a VA-guaranteed loan. Certain documentation, such as a valid DD 214 form or a current statement of service, will be required for a COE.
- Credit and income: Many loans, particularly purchase loans and cash-out refinance loans, require a satisfactory credit rating to qualify for the loan and proof of sufficient income to make ongoing mortgage payments.
If you’re a qualified veteran in search of a home loan, let Übermortage help you locate the mortgage that best fits your needs. Contact us today to speak with a loan officer or for more details on the types of VA home loans and VA loan guidelines that apply to your situation.