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Here at Government Loan Pro, we understand that VA home loans can be somewhat confusing to new home buying veterans. There are a lot of ins and outs to receiving a loan on a home and while we are more than happy to answer any questions you may have, we also understand that sometimes you just need a good guide to figure things out. That is why we’ve created this guide to answer your questions of “How does a VA home loan work?”

What is a VA Home Loan?

A VA home loan is a loan provided to veterans through the government agency of Veteran Affairs. This loan is guaranteed by the VA in the case that the buyer defaults. The main and original purpose of this loan is to assist in home financing for American military veterans and active personnel in areas with little to no private financing services. Now most veterans can take advantage of the benefits of a VA home loan regardless of private financing services in their area.

How Do I Qualify?

There are six ways to qualify for a VA Home Loan. You may qualify if:

  1. You are a veteran who has served for a minimum of 90 consecutive days during wartime or served for 181 uninterrupted days during peacetime.
  1. You are or were a member of the Reserves and have served for at least six years. The six years can be non-consecutive and served across the different branches but six years total service is necessary to qualify for a VA home loan. Qualifying reserve branches are the Army National Guard, the Air National Guard, the Army Reserve, The Navy Reserve, the Air Force Reserve, the Coast Guard Reserve and the Marine Corps Reserve.
  1. You are the widowed spouse of a veteran who died in active duty or due to a service connected disability or you are a surviving spouse of a totally disabled veteran whose disability may not have been the cause of death.  Your qualification may be affected by remarriage.
  1. You are the spouse of a member of the military who has been declared as MIA for over 90 days while in service.
  1. You are the spouse of a soldier who has been taken as a prisoner of war for over 90 days.
  1. You served with the allied forces during World War II and are currently residing in the United States.

How Does a VA Home Loan Work For Me?

A VA home loan works to benefit veterans who are soon-to-be homeowners in several ways. The main advantage is that homeowners with a VA loan are not required to carry private mortgage insurance or to pay a down payment. (There is a limit on VA home loan amounts given, with a cap at $417,000 for a home mortgage, but if your dream home is above this amount, you can still receive a VA loan, you’ll just be required to pay the difference as a down payment.) Secondly, a VA home loan limits the amount of closing costs, meaning that most closing fees are paid by the seller instead of the buyer. These loans also traditionally have competitive interest rates which are fixed (depending on your loan type) at the time of a home’s purchase. If the home is paid off early, there are also no penalties or fines.

Are There Different Types of VA Home Loans?

There are three types of VA home loans. The first is a conventional VA home loan which has all the benefits listed above while being for the typical home buying experience.

The second is for those looking to build a home and take out a VA home loan. This type of loan is defined as a VA Construction Loan and requires the builder to carry all costs until the home is 100% completed. Once the home is built, it must pass all required inspections and appraisals, similar to a conventional home building experience, to be guaranteed by the VA through a VA home loan.

The last type of VA loan is a VA Hybrid ARM Loan. ARM is an acronym for Adjustable Rate Mortgage, and this loan allows for a fixed interest rate for the first three to five years of owning the home. After the fifth year, the rate will annually increase by one percent with a cap at five percent of the total amount of the loan.

What if I Would Like to Refinance Into a VA Home Loan?

There are three types of VA refinancing and one of these allows veterans to refinance a conventional home loan into a VA home loan. This refinancing option works like a cash-out refinance with the homeowner receiving financing for up to 100% of the home loan and locking in a lower and fixed interest rate. Of course you can only receive this type of refinance if you meet the qualifications to receive a VA home loan.

A VA Home Loan for You

While there are a lot of ins and outs to receiving a VA home loan we hope that this guide has enlightened you on the process of receiving a VA home loan, how to qualify for one, how it benefits you and the other options you may have. If you have further questions or concerns, we would be more than happy to assist you. You can discuss your needs and/or questions with a direct lender at 1.888.407.0010 or contact us on our contact page.

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