Benefitting Veterans: VA Loan Program
Quite often, military men and women must relocate their families because of deployment orders, and for this reason, it can be a trying task for some families to build a strong financial profile. The Department of Veterans Affairs recognized this and decided one way they could give back was to offer the VA Loan program, which has allowed over 20 million active duty and veteran service members to purchase the home of their dreams.
VA Loan Benefits
Benefits of the VA Loan program have been tailored to fit the specific needs of service members by offering a zero down payment option to qualified applicants. If a down payment is required, it is generally not above 5 percent, which is still much lower than conventional loans usual 10 to 20 percent. Other benefits of the VA home Loan program include:
- No Private Mortgage Insurance (PMI)
- No prepayment penalties
- Lenient credit requirements
- Refinancing options
VA Loan Uses
VA loans can be used for the purchase of a single-family home, a VA approved condo, or to refinance your current residence. However, potential applicants must keep in mind that VA loans can only be used for their primary residence, and cannot be used for investment properties.
Massachusetts carries high loan limits, which allow service members to borrow up to $1,000,000 in certain counties, landing well above the normal $417,000 limit. For a service member to be eligible for the VA loan program they must fall under one of the following criteria:
- Served for 90 consecutive days during wartime
- Served for 181 consecutive days during peacetime
- Served in the reserves for a minimum of 6 years
- Be the spouse, currently not remarried, of a soldier who died during service or due to a service related injury
VA Loan Refinance
Those who wish to refinance using their VA Loan benefit have several options to consider, such as the cash-out refinance and the Interest Rate Reduction Refinancing Loan (IRRRL).
It is the borrower’s decision if or when he or she will refinance their loan, since market conditions change daily. It is important to carefully consider all the options and to speak with a VA Loan specialist or a financial planner before refinancing your home.
If refinancing makes sense, the VA Loan offers many benefits, such as lower monthly payments or the ability to use a cash-out refinance that allows the borrower to take cash out of the home without taking any money out of his or her pocket. The Veterans’ Benefits Improvement Act of 2008 now gives borrowers the ability to take out up to 90 percent of one’s current loan-to-value.
By doing this, one is free to use the money to make repairs to his or her home, pay other bills, or perhaps save the cash for future use; many also choose to do a VA Loan refinance in order to get a lower interest rate.
An IRRRL is often referred to as a “streamline” and is a popular choice among VA Loan borrowers. In order to do an IRRRL, one must have used the VA Loan on the property he or she intends to finance. The interest rate on the new loan must be lower than the rate of the current loan, except if one is choosing to refinance an adjustable rate mortgage (ARM) to a fixed rate mortgage. Unlike the cash-out refinance, the borrower is not allowed to take out any cash with an IRRRL.
Matt Polsky is a mortgage commentator for VA Mortgage Center.com. VAMC Is the Nation’s leading provider of VA loans, securing over $1 Billion in VA Loan financing in 2010.
