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As the U.S. winds down its involvement in dual wars in the Middle East, a growing number of the military are coming home and returning to civilian life. Many of these military members will be ready to buy a new house or perhaps refinance an existing mortgage. The good news is there are favorable financing options through the Veteranâ€™s Administration (VA) that are not available to the rest of the public.
Buying a New Home
The VA assists military veterans and their family members that want to buy, build, or fix up a home. The financing itself is through a private lender, with the VA guaranteeing a portion of the loan. With this guarantee, a lender has greater flexibility with the terms they are able to provide the borrower.
In general, the VA guarantees 25% of the amount of the mortgage up to a maximum of $417,000. There are some counties throughout the U.S. where these limits are higher, which are counties where home values are much higher than the national average. For example, currently 21 counties in California where the VA mortgage maximum is higher than $417,000.
Because the VA is backing 25% of the loan, the borrower can obtain the financing with no down payment and no private mortgage insurance (PMI). It should be noted that the VA places no restriction on the borrower exceeding the $417,000 maximum with their financing. However, they will not guarantee any amount that exceeds the limit. In these cases, the borrower may need to come up with a down payment to account for the difference.
Refinancing an Existing Mortgage
The VA has a great program for veterans who have an existing mortgage and want to refinance at a lower rate. This program is called the Interest Rate Reduction Refinance Loan or VA Streamline Refinance for short. Under this program, a veteran can refinance their existing VA loan to a lower rate with minimal red tape and no out of pocket expenses. To be eligible, the borrower must be current on their existing loan. In addition, the new monthly payment must be lower than the current payment (with some exceptions) and there is no cash-out option. Veterans looking for such an option may want to consider a VA Cash-Out Refinance instead.
As with conventional mortgages, VA loans require the borrower to obtain approval based on income, credit score, and any other pertinent factors. However, for those who are eligible, it is the easiest way to get into a home without having to come up with any money out of pocket. To find out if you may qualify for a new home loan or refinance, speak to a loan officer with expertise in VA procedures.