If you’re a first time home buyer, getting a mortgage can seem pretty daunting. That’s why we’re going to help out our veteran friends today, by giving a little background on the three main types of VA loans available. Each loan has a unique function or purpose, and choosing the right one for your needs is very important.
The first type of loan is usually the perfect loan for first time home buyers – it’s called a Purchase Loan. It is the basic VA loan for purchasing a home, and it can have huge advantages over purchasing a home through a conventional loan. The two main advantages this type of loan has, are highly competitive interest rates and that they are generally much easier to qualify for. This not only makes it a great option for first time home buyers, but for anyone who might not be able to qualify for a conventional loan due to issues like credit scores.
The second type of loan is a Cash-Out Refinance loan. This type of loan refinances your current loan (generally up to 90 percent of its value) and gives you cash for the value of your home equity. The unique feature about this loan is that the current loan you are trying to refinance does not need to be a VA loan. So you can have a conventional loan and refinance for a lower interest rate and get the value of your home equity in cash!
The third main type of VA home loan is called an Interest Rate Reduction Refinance Loan (IRRRL.) An IRRRL does not allow you to take out a loan above the balance of your current mortgage, so unlike the cash-out refinance, you won’t get any money back. However, there are two big benefits for this type of loan, it is used to lower your interest rate and it gives you the ability to switch from an adjustable, to a fixed rate mortgage. This makes it the perfect option for a veteran using a VA loan, who wants a reduced monthly payment and/or interest rate.
Each of these loans have different advantages and qualifications. Hopefully you understand the different advantages now. If you want to learn more about the different qualifications, give us a call today. Our experts are happy to help anyone with questions.