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As a member of the US military, you make great sacrifices for our country. In return, there are certain perks that you may be able to take advantage of, and that includes the VA Home Loan Program.
If you are a veteran of the U.S. military, you already know about this program. You may even have bought your home using this exceptional program, since it does not require a down payment (100% financing), no mortgage insurance, and the interest rates are about a half percent lower than for conventional loans.
Many veteran homeowners today have conventional loans on their homes, but are thinking about refinancing. You may be one of those people.
Even if you have plenty of equity in your home, you may still want to consider doing your refinance with a VA loan rather than a conventional loan, and there are many reasons why.
If you qualify for a VA loan, you can take advantage of financing your entire purchase. That means you won’t have to make a down payment! Many buyers struggle to scrounge enough money for a decent down payment. But with a VA loan, no down payment is required.
What’s even better is that you don’t have to stay under a certain loan limit either. Thanks to a recently passed law, VA loan limit amounts are eliminated. Before, veterans would be subject to paying a down payment if they went over the stated loan limit in their county. More specifically, they would have to pay 25% of the amount in excess of the loan limit. But now that these limits have been removed, borrowers can borrow any amount of money without making a down payment.
Of course, borrowers will still have to get approved for the loan amount they want. Their lenders will still want to assess their credit scores and incomes before a certain loan amount is approved.
Not only that, but some veterans may still be subject to loan limits if they already have more than one VA loan taken out at the time or have defaulted on one in the past.
The rate for a VA loan is lower than for a conventional loan, generally about .25% -.375% lower. This is highly advantageous as a lower interest rate can save you tens of thousands of dollars over the life of your loan. Even a fraction of a percent lower in interest can be a real money-saver. Even if you go in with a tiny down payment – or no down payment at all – and sub-par credit, you can still land a rate lower than most conventional home loans.
Underwriting standards are more lenient for VA loans than for conventional loans. Specifically, a veteran borrower with a lower credit score—let’s say 620 or even lower—will not pay a higher rate for a VA loan, whereas the conventional borrower with the same 620 scores would have a rate as much as .75% higher.
If the homeowner wants to get cash from the home’s equity, VA will allow a loan for the full value of the home, while a conventional loan will be capped at 80% of the appraised value. That means you can access 100% of your home’s equity if you ever need extra cash for whatever reason.
Home equity loans can be used to cover the cost of any pressing expense you have rather than having to apply for a conventional loan. If you’re a homeowner, you already have an asset of value that can be used to collateralize a financing product in the form of a home equity loan.
There is no additional cost for a cash-out refinance with the VA. The rate for a conventional loan will have a rate approximately 0.125% higher than for one where the homeowner does not take any cash out. The VA cash-out loan does not have the same kind of rate adjustment for cash-out.
Some people believe, mistakenly, that getting a VA mortgage is full of bureaucratic red tape, hassles, and delays. Nothing could be further from the truth; the Veterans Administration guarantees the loan, but lenders underwrite and fund VA mortgages according to VA guidelines. If anything, VA loans are easier to qualify for than conventional loans.
Related: How hard is it to get a VA loan?
There is, however, much more to a VA refinance than just knowing the benefits. In order to take advantage of the opportunity to refinance, download our free ebook and learn more about how to move your journey from idea to completion.
Check out our mortgage loan limit tool for conventional, FHA, and VA loans.
Sammamish Mortgage offers FHA loans for home buyers across Washington State. We’re a local mortgage company serving the broader Pacific Northwest region, including Washington state, Idaho, Colorado, and Oregon since 1992. We are proud to offer a wide variety of mortgage programs and products with flexible qualification criteria. Please contact us if you have any questions or are ready to apply for a home loan.
Home buyers are often drawn to the FHA mortgage program due to the low interest rates, low closing costs and generally attractive loan terms. However, there will come a time when many who have an FHA mortgage will want to refinance.
The HARP program was introduced years ago as a means to help homeowners who were either underwater on their mortgage or had little to no equity in their homes. But this program is no longer in effect. But a replacement still is – the HLRO program – which may still help with refinancing and may come with easier qualifications.