How Do VA Loans Work?
If you’re considering a VA loan, you’ll need to have a basic idea of how a VA loan works. Since VA loans are only available to a limited group, you’ll also need to understand the eligibility requirements. In addition, it’s helpful to know about the types of VA loans available.
Discovering the VA Loan Basics
How do VA loans work? As Investopedia explains, VA loans provide eligible borrowers with 100-percent financing on the value of a home. Depending on the situation, those funds can be used to buy or build a house. They could also be used to finance repairs or improvements. Or, they could be used to refinance an existing home loan. Whatever the purpose of the loan, the VA sets the standards and terms and offers some backing, but it doesn’t make the loan. Private lenders do that, so people interested in applying for a VA loan will need to select a trusted lender who offers VA loans to work with.
Qualifying for a VA Loan
A VA loan is a benefit earned with service. Therefore, not everyone interested in buying a home has access to this type of loan. Credit Karma offers an overview of what’s required to qualify:
- Military service: To be eligible for a VA loan, you must meet the service requirements as an active-duty service member, veteran, or member of the National Guard or Reserve. Surviving spouses may also qualify.
- Sufficient income: Simply being eligible for a VA loan is not enough to qualify for one. To secure the loan that you want, you will also need to demonstrate that you have enough income to repay the loan.
- Satisfactory credit: The VA doesn’t mandate a minimum credit score. In fact, relaxed credit requirements are one of the widely acknowledged advantages of VA loans. However, individual lenders may have a minimum credit score requirement.
Exploring the Types of VA Loans
Housing goals come in all shapes and sizes, and it takes a variety of loan products to reach them effectively. The VA offers several different loan options to fit the diverse needs of the people that it serves. NerdWallet provides a handy summary of the types of VA loans:
- VA Purchase Mortgage: This popular form of the VA loan can be used to buy a newly constructed home, a fixer-upper, a duplex, a condo, or other types of properties. If the transaction meets the necessary requirements, no down payment is needed.
- VA Rehab and Renovation Loan: Are you interested in rolling the costs of renovations into your home loan? This loan makes that possible.
- VA Streamline Refinance: Also known as the VA Interest Rate Reduction Refinance Loan, or IRRRL, this loan is only available to people who already have a VA loan. It’s a quick way to refinance into a new VA loan if you want a lower interest rate.
- VA Cash-Out Refinance: You can replace either a VA loan or some other type of home loan with a VA loan that has better terms. It’s also the only type of VA loan that provides an opportunity to transform some of your home equity into cash.
How to Use a VA Loan
Is a VA purchase loan the right choice for you? According to Military.com, the process for using this loan is fairly straightforward:
- Choose a lender who offers VA loans.
- Obtain a Certificate of Eligibility from the VA.
- Get prequalified* for your VA loan.
- Find a home to purchase.
- Wait while the home undergoes a VA appraisal and the lender processes your loan application.
- Close on your loan.
Are you eager to learn more about VA loans? Are you interested in exploring other possibilities? The loan experts at PrimeLending Dallas can assist you in finding the best loan product for your situation. Contact us today to get started.
*All loans subject to credit approval. A prequalification is not an approval of credit, and does not signify that underwriting requirements have been met. Conditions and restrictions may apply.