What is a VA Loan?

A VA loan or VA mortgage is a program offered by the U.S. Department of Veterans Affairs (VA) that allows active duty, veterans, and qualified surviving spouses to purchase homes with no down payment and no private mortgage insurance (PMI). In addition, VA loans generally have more competitive interest rates than conventional loans. 

How a VA Loan Works

VA loans are available to active-duty service members, veterans, and qualified surviving spouses to achieve the dream of homeownership. Eligible borrowers can use a VA loan to build a house, renovate, refinance, or purchase a home. VA loans have favorable terms, like 100% financing, since the U.S. Department of Veteran Affairs guarantees the mortgage.

The U.S. Department of Veteran Affairs sets the qualification standards for loan terms and backs the loan. However, they do not originate loans. Instead, private lenders, such as Texas Regional Bank, offer financing for VA loans. 

Types of VA Loans

Purchase Loans:

• VA Purchase Loan: Also known as a VA home loan, this program helps eligible veterans and active-duty service members buy a home with no down payment or a low-down payment. The VA guarantees a portion of the loan, which allows lenders to offer competitive interest rates.

Interest Rate Reduction Refinance Loan (IRRRL):

• VA Streamline Refinance (IRRRL): This program allows veterans and service members with existing VA loans to refinance their mortgages to obtain a lower interest rate without needing a new appraisal or credit checks. It’s designed to make the refinancing process quicker and more straightforward.

Cash-Out Refinance Loans:

• VA Cash-Out Refinance Loan: This option allows eligible borrowers with existing VA or conventional mortgages to refinance their homes and take out cash from the equity in the property. The loan can be used for various purposes, such as home improvements, debt consolidation, or other financial needs.

How to Qualify for a VA Loan

Similar to FHA and USDA loans, VA loans are backed by the government and come with strict guidelines that must be followed to qualify. 

• Meet the minimum active-duty service requirement, which is 90 continuous days of service.
  • If you are a veteran, minimum active-duty service requirements vary. Check the VA website for requirements. 
• Request your certificate of eligibility COE from the VA. The COE will let you know if you are eligible to qualify for a VA loan. 
• Surviving spouses, spouses of prisoners of war, or service members missing in action are eligible for VA loans. Find out more information on the VA website. 
• VA lenders set the minimum credit score required to qualify. Consider getting a pre-approval upfront before house buying to know if you are eligible for a VA loan. 
• The house you purchase must meet specific safety standards and building codes. During the application process, a VA-approved appraiser will appraise the property to ensure it meets these standards.  
• The house must be your primary residence. 

You may not be eligible for a VA loan if you have received other-than-honorable, bad conduct or dishonorable discharge. Let your loan officer know early in the process if any of these apply to your service so they can contact the VA. 

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Safety Standards VA Houses Must Meet

• Working electric, heating, and cooling.
• Recently replaced roofing.
• Clean water supply. 
• No lead-based paint.
• Free of dry rot, fungus, or termites. 
• Sanitary sewage disposal.
• Attic and crawl spaces must be accessible and adequately vented. 

Benefits of VA Loans

VA loan benefits are designed to make homeownership more accessible and affordable for those who have served or are serving in the military. 

1. No Down Payment: VA loans offer a significant advantage to eligible borrowers as they can buy a home without making any down payment. This can be a huge financial relief, especially when compared to conventional loans that demand a down payment between 3% and 20% of the home’s purchase price.
2. Competitive Interest Rates: VA loans often have competitive interest rates, resulting in lower monthly payments, as the VA guarantees a portion of the loan, making lenders more willing to offer favorable terms.
3. No Private Mortgage Insurance (PMI): VA loans don’t require PMI, even with zero down payment.

Conclusion 

VA loans in Texas offer eligible veterans and service members a pathway to homeownership with unique benefits, including no down payment, competitive interest rates, and no private mortgage insurance. Whether purchasing a home or refinancing, VA loans in Texas can be a valuable resource for achieving your homeownership goals.

For more information, visit our Mortgage – Home Loans & Refinance from Texas Regional Bank website.