A home loan is gradually becoming a basic necessity.
Only a few decades ago, getting a loan was a herculean task.
But slowly and surely, various banks, private finance corporations and other approved lenders are changing this scenario. Today, anyone with a steady income can opt for a home loan.
It not only solves the problem of acquiring cash for the down payment of a property but in the long run also doubles up as a way of saving.
In the US, the federal government provides people who have served in the military for a stipulated period of time the benefit to acquire a guaranteed home loan called the VA Loan.
A home loan guaranteed by the government to a veteran is called a VA home loan. The loan can be approved only by a lender who is himself approved by the Department of Veteran Affairs. The VA Loan is guaranteed only by the government and not by any private HFCs (Housing Finance Companies).
Name with brief description.
1.Normal VA loan
|This is the most basic of the VA loans. It is useful when the veteran wants to purchase a home.|
2.VA Streamline Refinancing Loan
|This enables the previously approved VA loan to be refinanced without additional costs. It reduces the interest rate on the VA loan.|
3.VA Cash Out Refinance Loan
|This allows the veteran to withdraw any cash that exceeds the payment of his original VA loan. The limit is up to a maximum of 95%.|
4. the regular ARM loan
|This allows the veteran to convert his conventional loan into a VA enabled loan and gives him safety from any fluctuating interest rates throughout the life of the mortgage.|
There are certain criteria that the veteran has to fulfill in order to qualify for a VA loan. They are:
The federal government is famed for taking initiatives to benefit a certain group or class of people. The idea of providing benefits to the society by individually appreciating their difficulties and challenges is well appreciated by the American public. It helps them to tackle one problem at a time and also increases the popularity of the government.
One such popular program is designed exclusively for veterans to help them acquire a home loan.
The Veteran Affairs does not issue any home loans but what it does instead is that it provides a guaranty on the qualified home loans. The agency only guarantees up to a maximum of one quarter the value of the home loan amount. The guaranty itself is enough to pump up the confidence levels of the veterans to pay for their own homes.
The terms and conditions for getting IRRRL approved:
Thus it is very clear that a VA streamline refinance loan or VA refi can only be claimed by the veteran on his existing VA loan and after proving that the VA loan was indeed used for the same house that the refinance is requested for.
This is a secondary type of Streamline Refinancing loan. The features of the Cash Out streamlining Refinancing loan are the following:
It has been noticed that the Cash out Streamline Refinance loan is very popular then the Basic Refinance loan type because of the following reasons:
Even though there is no fixed time for the veteran to own the house, he must prove to the lender that he has sufficient equity to pay back his loan amount.
While a VA loan has absolutely no slab limit. The VA Streamline refinancing loan or the IRRRL is limited only to the amount of the VA loan acquired by him and nothing more.
The term “assumable” means that someone else apart from the person who originally got the loan approved is ready to take the burden of the debt on himself. Now why will someone do that? I can hear you ask.
When the mortgaged property is sold to another even before the loan amount is fully paid, the buyer of the property will and can take the responsibility of paying the rest of the mortgage. This is especially beneficial to the buyer especially when the interest rate on a new loan is much higher than the existing loan’s rates.
The buyer will need to free the seller from all liability in writing otherwise it may affect the seller’s credibility if the buyer defaults on the payment of the loan. Thankfully, a VA loan is completely assumable as compared to a conventional loan.
PMI is the short for private mortgage insurance. Having no PMI is a signature benefit of the VA loan and it makes it so attractive for people that they do not even want to think of a conventional home loan.
Having no PMI is the reason why the veterans can save wads of currencies upfront. It is all based on a very simple logic. When a person initially starts scouting for a home loan the lender of a conventional loan will require him to have at least 20 percent of the value if the house inequity. Given the rise in the prices of real estate today, the harsh reality is that almost nine out of ten people cannot afford to even pay a down payment of the first 20% of the value of the home.
The lender will expect the home loan seeker to get a PMI which can drain precious cash out of his kitty. But a VA loan has no PMI and it does save thousands of dollars during the initial stages of the mortgage.
Well, if you are questioning this yourself, the answer can very well be the VA mortgage calculator. This application Can be used on all smart phones, tablet or laptop PC running on android systems.
The app needs you to fill in the total value of the home that you intend to acquire a loan for. The period of the loan and the rate of interest at the time of acquiring the loan have to be entered. There are other compulsory fields which will ask whether you have already availed any VA loan in the past and also the property taxes expected on the intended property.
The calculator will generate the result of the mortgage that you will be eligible for and also the monthly and the annual payment details. The calculations are done on the basis of the ratio of the total monthly debt payment to the gross monthly income also called the debt ratio.
VA loans are re usable. That is to say that every time you pay off your loan in time and complete your financial commitments you can again become eligible for another VA loan. In case, the veteran has a VA loan running or has lost the loan to foreclosure, it is not the end of the road for him. There are provisions in the VA loan portfolio where he may be eligible again to request a new VA loan.
How much a veteran qualifies for is expressed in a formula called the “debt ratio”. The debt ratio is expressed as a percentage and it is derived by dividing the debt obligation itself by the veteran’s monthly income. The maximum VA debt ratio limit presently is pegged at 41%. Anything below this number qualifies for the loan.
It is a prudent habit to initially compare the refinance costs in order to ascertain whether refinancing the loan is beneficial in your case at all. Even a slight drop in the interest rate of your VA loan may warrant you to go in for refinancing. The result may be that you save at least a few thousand dollar on refinancing your VA loan.
This is a leading question. Yes, VA home loans are extremely good! If the statistics can prove it, then till date, the program has helped 22 million military men and women in service become proud homeowners since the program was started as early as in the 1940s.