A huge question that many of our borrowers have is what different types of VA loans are available? Many don’t realize that there is more than just one type, but in fact, there are 5. These types include purchase, construction, cash out, IRRRL, and EEM. Here at Low VA Rates, we like to educate all of our borrowers about the different options they have, so they can be sure they’re getting the best mortgage plan. Take a look at the VA loans below. Which would best fit your needs?
The VA Purchase Loan
Qualifying veterans can use a VA purchase loan to purchase a new home. And if you have VA eligibility, you definitely should take advantage of this loan from the start. Just a few of its benefits include the following:
- 100 percent financing. That means you can buy your new home without making a down payment. Just about every other loan program out there requires some sort of down payment, but not the VA.
- No closing costs at closing. I’m not saying there aren’t closing costs because there are. But you can roll all of the closing costs into the loan amount if that fits your needs.
- Limits on what the borrower can pay in closing. The VA limits which fees a borrower can actually pay for, meaning you will pay less at closing with a VA purchase loan than most other loans done through other government programs or a conventional loan.
- Lower interest rates. With all types of VA loans, you’re going to find low rates. Why? The Department of Veterans Affairs backs each loan, meaning there is a lot less risk for the lender in giving you a lower rate.
The VA Construction Loan
A VA construction loans allows you to build your own home from scratch. When construction on the home is finished, your loan will convert into a 30-year fixed mortgage.
Many borrowers have been mislead into thinking that the VA doesn’t do construction loans. In reality, the VA doesn’t do any loans. They simply back each loan, as I said above, as long as all the requirements are met. The lenders who do VA mortgages are the ones who get picky when it comes to construction loans. But at Low VA Rates, we won’t turn borrowers away from this option.
VA Cash Out Refinance Loan
A VA cash out refinance loan allows you to take advantage of equity in your home in order to get additional cash out on top of your mortgage. This cash can be used for virtually any purpose: a new car, paying off student loans, paying off credit cards, vacations, etc. The VA cash out can also refinance your mortgage from any other loan type into a VA loan, which isn’t possible with the VA streamline refinance. Since the cash out loan is a refinance, it can also adjust your interest rate and term, potentially saving you large sums of money over time on your mortgage.
Interest Rate Reduction Refinance Loan (IRRRL)
The Interest Rate Reduction Refinance Loan, also known as the IRRRL or VA streamline loan, is the most popular VA loan out there. In addition to the benefits listed above for all VA loans, take a look at some of the benefits an IRRRL specifically has to offer:
- Lower interest rates. Like it indicates in the name (interest rate reduction), the primary purpose of the VA streamline refinance is to get you a lower rate than you were at before. Some veterans save thousands of dollars every year through the VA IRRRL and tens of thousands over the life of the loan.
- Quick and easy. This streamline loan is designed to be fast and easy for the borrower to complete. That means there is less paperwork and fewer hoops to jump through. In fact, you could finish the IRRRL in as little as 10 days.
- Adjust to a more favorable term. If you find that the current term of your loan is too short or too long, you can adjust it through the IRRRL, like many other refinances. If you can afford to make larger monthly payments with a shorter term (thereby cutting thousands of dollars of interest), see how the VA streamline can help.
Energy Efficient Mortgage (EEM)
The EEM can be added to any VA loan to give you up to an extra $6,000. This money must be used for energy efficient improvements to your home. For example, watering your lawn regularly adds up to a lot of money, and in droughts, this could hurt the environment. In this case, you could use the EEM to replace the grass in your lawn with turf, thereby cutting down on water and saving you money. Other improvements include double-paned windows, a more efficient cooling system, and solar panels. The bottom line is that if the improvement will lower your utility cost, you will likely be approved for an EEM.
Financing with the Right Loan Could Save You Thousands
Along with the different types of VA loans above, you should also keep in mind that you have many options for rate plans as well. For example, you can choose to do a VA hybrid loan with any of the types above and get both the stability of a fixed-rate period and the flexibility of adjustable rates. Do any of the different types of VA loans above appeal to your home needs? It’s never too late or too early to start saving money. Give us a call today at 855-223-0705 to learn more about what we at Low VA Rates can offer you.
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