VA loans: Understanding your purchase or refinance options
VA loans provide qualifying homebuyers power benefits when it comes to purchasing or refinancing a home. If you or your spouse are an active-duty member of the military, transitioning out of the military or a veteran, it’s worth your while to understand how a VA loan can help you meet your financial goals. And as a proud partner of the USO, we’re here to make sure VA borrowers get the guidance and support they need at every stage of the homebuying process.
But before you can dive in, it’s important to understand the advantages of VA financing, and how they apply to both purchasing or refinancing a mortgage.
Purchase advantages
- No down payment options
While conventional loans generally require down payments that can reach up to 20%, a down payment is not required for a VA loan at under the local conforming limit. You can choose to make a down payment if you’re willing and able to, but they are not a requirement. The VA also allows you to purchase jumbo loans, under certain conditions.
- No PMI
Most mortgages require Private Mortgage Insurance (or PMI) when the buyer puts less than 20% down on the purchase of a home. PMI can typically add 0.2-0.9% of expenses to your monthly mortgage. But with a VA loan, you can wave goodbye to PMI!
Refinancing advantages
When it comes to refinancing, borrowers can refinance their homes with a VA streamline or cash-out loan. The streamlined version lowers the mortgage rate of an already existing VA loan, usually for less than the current principal and interest and typically doesn't require a credit check or appraisal. A potential cash-out option would involve a credit check and appraisal, since the home’s value represents the maximum loan amount and the new loan will be larger than the existing loan.
Additional benefits, for either purchase or refi
Competitive interest rates
Since VA loans are guaranteed by the federal government, they can provide lenders with a greater sense of safety and flexibility. Though rates depend on many factors, the security of VA loans can often lead to a more competitive interest rate than you may otherwise receive.
Easier to qualify
Similarly to the interest rates, the VA loan being backed by the government also lets the banks assume far less of the risk. This can lead to less stringent qualification standards, once the aforementioned qualifications are met.
Fewer credit restrictions
Reduced restrictions mean easier qualification. With a VA loan, you’re allowed a higher debt-to-income ratio and afforded more leniency with your credit score.
Lastly, always understand your options
While VA loans offer powerful benefits to homebuyers, sometimes they might not be the best possible choice for your unique situation. If that’s the case, our variety of loan products mean we’ll be able find the perfect loan option for you. The best way to determine which option is right for you is to reach out to one of our experienced loan officers. No matter where you are in your homebuying journey, we’re here to help.
Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Restrictions may apply, contact Rate for current rates and for more information.
Rate, Inc. is a private corporation organized under the laws of the State of Delaware. It has no affiliation with the US Department of Housing and Urban Development, the US Department of Veterans Affairs, the US Department of Agriculture or any other government agency.
United Service Organizations, Inc. (USO) is a non-profit 501(ϲ)(3) organization (EIN/Tax ID: 13-1610451) and not part of the Department of Defense (DoD).