VA loans have long been a vital resource for military service members and veterans wishing to become homes. These loans stand out in the world of home financing because of their advantageous terms and unique features. While many people are aware of the fundamentals of VA loans, there are several lesser-known facts and features that can have a significant impact on your comprehension of this program.
Fact 1: VA Loans Can Be Used More Than Once
One prevalent mistake about VA loans is that they are only available once in a lifetime. In truth, under certain conditions, you can use your VA loan benefits numerous times. Understanding these conditions can make or break a veteran’s or active-duty military member’s career.
Restored Entitlement
If you utilized your VA loan benefit to buy a home and have since paid it off or sold it, you may be able to reclaim your entitlement. This means you can use your VA loan benefit again, either for a new house or to refinance your current mortgage. The previous VA loan must be paid in full, and you must no longer own the property, in order for your claim to be restored. Furthermore, the maximum loan amount you can use for a second VA loan is frequently limited.
Using Your Remaining Entitlement
You can still apply for another VA loan if you haven’t exhausted your entire VA loan entitlement. Even if you’ve already used a portion of your entitlement, you can use it again. This is a particularly beneficial choice for those who live in high-cost areas, as the VA program normally allows for a maximum loan amount of $548,250 (in 2021).
Active-Duty Service Members
Active-duty military personnel routinely relocate owing to changes in station assignments. In some instances, you can keep your existing VA-financed house and use your VA loan benefit to buy a new home at your new duty station. This flexibility can be a huge benefit because it lets you to keep your current home and create equity while serving your country.
Fact 2: VA Loans Are Assumable
One of the lesser-known benefits of VA loans is that they can be assumed by another eligible borrower. This distinguishing feature can be extremely useful in some situations.
The Assumption Process
When someone assumes your VA debt, they replace it with the same interest rate, repayment conditions, and balance. The procedure is quite simple, with the lender often needing the assuming party to meet credit and income criteria in order to ensure they can manage the loan.
Advantages for Sellers
When selling a property, having a VA loan with a low interest rate might be a key selling feature. Potential purchasers may find it enticing to assume your debt, especially if they are having problems obtaining a mortgage with comparable advantageous terms in the current market.
Financial Benefits for Buyers
Obtaining a VA loan might be a cost-effective solution for purchasers to purchase a property. It enables customers to take advantage of the existing loan’s reduced interest rate while avoiding the costs of closing on a new loan. Buyers must, however, be eligible for a VA loan in order to assume one.
Approval Process
It’s crucial to remember that not all VA loans are assumable, and the process requires approval from both the lender and the VA. Furthermore, if the assuming party defaults, the seller may still be liable for the loan, therefore it’s critical to understand the legal ramifications before continuing.
Fact 3: VA Loans Can Be Used for More Than Just Home Purchases
While most people identify VA loans with home purchases, they have a larger range of applications that many people are unaware of. These alternative usage can provide financial flexibility and opportunity to veterans.
Refinancing with a VA Loan
Veterans can use a VA loan to refinance current mortgages as well as purchase new homes. The Interest Rate Reduction Refinance Loan (IRRRL), also known as the VA Streamline Refinance, and the Cash-Out Refinance are the two main types of VA loan refinancing. The IRRRL is a simple approach to lower your interest rate, whereas the Cash-Out Refinance allows you to use the equity in your house for a variety of purposes, such as home upgrades, debt consolidation, or other financial requirements.
Home Improvements
Through the VA Rehabilitation Loan, veterans can finance home improvements and repairs. This program, also known as a VA Renovation Loan, enables borrowers to incorporate the cost of approved renovations in their mortgage payment. It’s a great choice for veterans who want to buy a fixer-upper or modify their current properties to better suit their needs.
Energy-Efficient Upgrades
VA loans also help with energy-efficient home upgrades. The VA Energy-Efficient Mortgage (EEM) program enables veterans to finance energy-efficient renovations like solar panels, insulation, or high-efficiency HVAC systems as part of a home purchase or refinance.
Manufactured Homes
Many people are unaware that VA loans can be utilized to buy or refinance manufactured houses provided they meet certain VA requirements. This broadens housing alternatives for veterans, especially in areas where manufactured housing is common.
Adaptations for Disabilities
The VA gives funds to veterans with service-connected disabilities to help them make essential home modifications. These adjustments may involve installing ramps, enlarging entrances, or making other changes to increase accessibility and the quality of life for veterans with disabilities.