What is a VA Loan?
A VA Loan is a mortgage loan guaranteed by the United States Department of Veterans Affairs (VA). It offers long-term financing to eligible American veterans and their surviving spouses. The primary goal of the program is to provide eligible veterans with home financing that requires no down payment.
Who Can Apply for a VA Loan?
- Active-duty service members
- Veterans
- National guard members
- Reservists
- Cadets in the Air Force, Coast Guard or U.S. Military
- Officers of the National Oceanic and Atmospheric Association (NOAA)
- Individuals who have served 181 continuous days during peacetime or 90 days during wartime
- Veterans who enlisted after September 7, 1980, or began service after October 16, 1981, must have served a minimum of 6 years (criteria apply)
- The surviving spouses of veterans who died from service-related disability or during active duty
Benefits of a VA Loan
For active-duty service members, veterans, and their surviving spouses, this is a valuable lifetime benefit that can be used multiple times. Other significant benefits include:
- No down payment required
- Competitive interest rates
- Limited closing costs
- No Private Mortgage Insurance (PMI) requirement
VA Renovation Program
If you own a home that needs minor repairs, but you lack cash on hand, you may be able to renovate using VA loan benefits. The VA Renovation Program helps the men and women who serve our country repair or upgrade their homes using the competitive rates offered by VA lending programs.
The VA Renovation Program allows for minor renovation costs to be included in the loan amount of a home purchase, or for repairs being done to an existing home with equity. This program is ideal for small repairs, such as repainting and fixture swaps, or for accessibility upgrades like ramps and rails.
Program Features Include:
- Up to $35,000 in renovation costs
- No minimum repair amount (includes minor and non-structural repairs)
- Accessibility upgrades
- Flexible delivery channels
- For purchase or refinance properties
- Cosmetic repairs allowed
- No consultant required
Additional VA Programs:
Interest Rate Reduction Refinance Loan (IRRRL)
A great VA Loan Refinance Option, the IRRRL or the Streamline Refinance Loan can help borrowers obtain a lower interest rate by refinancing your existing VA Loan.
Native American Direct Loan (NADL) Program:
Specifically designed to help eligible Native American Veterans finance the purchase, construction, or improvement of homes on Federal Trust Land, or reduce the interest rate on a VA Loan.
Adapted Housing Grants:
Designed to help veterans with a permanent and total service-connected disability purchase or build an adapted home or to modify an existing home to account for their disability.
Selling or Buying a Home with an Existing VA Loan? Explore a VA Loan Assumption.
One of the lesser-known benefits is the VA Loan Assumption. Assumable loans have become increasingly attractive to today’s buyers, particularly in a high-interest-rate environment.
An assumption allows a homebuyer, whether they are a veteran or not, to take over a VA Loan, including its interest rate and remaining balance. This can be a powerful selling point for VA homeowners as assumptions typically come with lower fees and fewer closing costs.
Benefits:
- Lower Interest Rate: the buyer inherits the seller’s existing interest rate.
- Lower Costs and Fees: Assumptions typically involve lower fees and fewer closing costs. The only mandatory fee is the Funding Fee, equal to 0.5% of the loan balance.
- Simpler Qualification Process: Often a less intense process than applying for a new mortgage.
- Open to all Buyers: the buyer does not need to be a veteran to assume the loan.
Cons:
- Equity Payout Requirement: To close the deal, the buyer must have sufficient cash to cover the difference between the home’s sales price and the remaining loan balance (the seller’s equity).
- Entitlement Risk for Seller: If a non-veteran assumes the loan, the seller’s VA Loan entitlement will remain tied to that property until the loan is fully paid off.
- Continued Liability Risk: Until the seller receives a formal “release of liability” from the lender, they can remain financially responsible if the new borrower defaults on the loan.
Ready to Explore Your VA Loan Options?
Southern Trust Mortgage is proud to deliver affordable VA mortgage financing to eligible veterans and active-duty servicemen and women of the United States’ military. Given that the Southern Trust footprint covers many military areas, our loan officers are extremely experienced in VA lending and all VA programs. Contact us today to get started!
For more information please visit: https://www.benefits.va.gov/homeloans/
