VA Mortgages : Lower Rates, 100% Financing, And IRRRL Access
As the housing market recovers, more U.S. home buyers are using VA loans to finance a home purchase.
VA loans are available to most active military personnel and to veterans; and offer more flexible loan terms, lower downpayment requirements, and -- lately -- lower mortgage rates as compared to comparable conventional home loans.
It's no wonder VA loans are increasingly common.
VA Loans : No Downpayment Required
Similar to conventional home loans via Fannie Mae and Freddie Mac, VA loans are "made" by private mortgage lenders. They are available via banks, credit unions, and mortgage brokers, for example.
However, what makes VA loans different is that their performance is guaranteed by the federal government. More specifically, VA loans are guaranteed by the U.S. Department of Veterans Affairs, protecting lenders against losses due to default.
The VA Loan Guaranty Program was established in 1944 as part of the G.I. Bill of Rights program.
VA mortgages are underwritten to a different set of guidelines as compared to conventional and FHA home loans, and other loan types.
One notable variation is that loans via the VA Loan Guaranty program require no downpayment. So long as a subject property appraises for its purchase price, a buyer can finance the home's full amount, up to the local VA loan limits for the area.
Another variation is that VA home loans have no mortgage insurance requirement.
Whether you make a 20% downpayment or no downpayment at all, your annual mortgage insurance payment is zero. This can render VA loans much less costly on a monthly basis as compared to conventional or FHA financing, where mortgage insurance rates can top 1.5 percent annually.
A third VA loans allow for higher debt-to-income ratios, which can make qualifying for a home loan easier.
The IRRRL : A Special Refinance Program For VA Homeowners
VA loans are an excellent option for more than just home-buying servicemembers and surviving spouses. They can be excellent for existing VA-backed homeowners, too. Specifically, via the VA's Interest Rate Reduction Refinance Loan (IRRRL).
Sometimes called the VA Streamline Refinance program, the IRRRL is among the easiest, least-intrusive mortgage refinance programs available to U.S. homeowners today.
According to the VA home loan guidelines, the IRRRL program requires no appraisal, no income verification, no credit score verification, and no employment verification. You must certify that you've lived in the home being refinanced at some point in time, and your monthly payment may not increase via the refinance.
You must also be current on your mortgage, with no more than one 30-day late in the last 12 months.
Mortgage rates for a VA Streamline Refinance are as low as all other VA mortgage rates.
How Much Home Can You Afford With A VA Mortgage?
For today's eligible military personnel, the VA Home Loan Guaranty program offers a low-rate, low-payment combination for which underwriting standards are loose. And, because VA loans go to foreclosure less often than other loan types, the program is attractive to lenders, too.
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