A VA loan is a mortgage loan in the United States by qualified lenders and guaranteed by the U.S. Department of Veterans Affairs (VA). The loan may be issued by qualified lenders. Most VA Home Loans are handled entirely by private lenders and VA rarely gets involved in the loan approval process. VA “stands behind” the loan by guaranteeing a portion of it. The guarantee VA provides to lenders allows them to provide loans with more favorable terms, such as: no down payment as long as the sales price doesn’t exceed the appraised value, no private mortgage insurance premium requirement, limits on the amount the buyer can be charged for closing costs and allowing closing costs to be paid by the seller, and no penalty fee can be charged if the loan is paid off early. If something goes wrong and the homeowner cannot make the payments anymore, the lending institutions can come to VA to cover any losses they might incur. The VA loan guaranty is the “insurance” that VA provides the lender.
The Department of Veterans Affairs (VA) home loan programs serve a clientele which is diverse in many ways. The only common denominator of this clientele is service in the nation’s Armed Forces. Since the inception of these programs, the objective has been to assist eligible veterans in becoming homeowners. Veterans are assisted by making it possible for them to compete in the market place for credit with persons who were not obliged to forego the pursuit of gainful occupations by reason of service in the nation’s Armed Forces. VA programs are intended to benefit men and women because of their service to the country, and they are not designed to serve as instruments of attaining general economic or social objectives.
VA has guaranteed over 20 million home loans to veterans to purchase or construct a home, or to refinance another home loan on more favorable terms. The VA home loan program has made mortgage credit available to many veterans who would not otherwise have been able to attain a loan. In this connection, although VA borrowers have been directly favored by the more liberal terms on those loans, it is also likely that these terms have induced a competitive liberalization of the terms on conventional mortgages, thus benefiting those recipients as well. As a result, the impact of the VA home loan programs on the economy and on the mortgage market vastly exceeds the actual volume of VA home loans.
VA offers a variety of home loan guaranty programs for Active Duty Servicemembers, Veterans, and National Guard and Reserve members. Purchase Loans help Veterans purchase a home at a competitive interest rate often without requiring a down payment or private mortgage insurance. Cash Out Refinance loans allow Veterans to take cash out of your home equity to take care of concerns like paying off debt, funding school, or making home improvements. Interest Rate Reduction Refinance Loans (IRRRLs), also called the Streamline Refinance Loans, can help Veterans obtain a lower interest rate by refinancing their existing VA loan. The Native American Direct Loan (NADL) Program helps 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. Lastly, Adapted Housing Grants 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.