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VA
Guaranteed Loan
The US
Department of Veteran Affairs originally conceived the VA
home
loan
guaranty program in 1944. The objective of the VA
loan
program was to diminish the economic problems of post war adjustments
for millions of men and women serving in the armed forces. Since its
inception, the VA
has guaranteed over 18 million home
loans
enabling veterans to purchase or construct a home,
or refinance
another home
loan
on more favorable terms.
What Is a VA
Guaranteed Loan
VA
guaranteed loans
are made by private lenders or mortgage companies to eligible veterans
for the purchase or refinance
of a home.
To get a VA
loan,
you must apply to the lender. Once your loan
is approved, the VA
will guarantee a portion of it to the lender. The guarantee protects
the lender against a loss up to the amount of the guarantee allowing
for more favorable purchase or refinance
terms.
There is
no maximum loan
amount for a VA
loan,
but lenders will generally limit VA
loans
to $417,000, the current conforming loan
limit. For loans
up to this amount, it is usually possible for qualified veterans to
purchase a home
with no down payment or refinance
their existing even if they have no home
equity.
Who Is
Eligible
Retired
veterans as well as those on active duty for the US Armed Forces may be
eligible for a VA
loan
for their refinance.
The are many limiting factors, but if you have served at least 181 days
of active duty (90 days during the Gulf War) you may eligible for a VA
loan
guarantee.
How to Refinance
Your VA
Loan
The VA
does allow for an Interest Rate Reduction Refinancing Loan,
known as the IRRRL. You could also see it referred to as a streamline
or VA
to VA
refinance
loan.
The IRRRL allows veterans to refinance
their existing loan
provided it was originally approved with a VA
guarantee loan.
The IRRRL
also requires that when you refinance
your existing VA
loan,
it must result in a lower interest rate, unless you are changing from
an existing VA
guaranteed adjustable rate mortgage (ARM) to a fixed rate. When you are
refinancing from an existing VA
ARM loan
to a fixed rate, the interest rate may increase.
An IRRRL
may also be done with "no money out of pocket" by including all the
closing costs into the new loan
using your home
equity.
The loan
may not exceed the total of the outstanding balance of the existing VA
loan,
plus all the allowable fees and closing costs, as well as up to $6,000
of energy efficiency improvements. In other words, you cannot refinance
your VA
loan
to tap into your home
equity
for cash out proceeds.
If you
are a veteran and are considering refinancing your existing VA
loan,
I strongly urge you to contact several lenders. There may be big
difference in the terms offered by various lenders.
Sources:
Department of Veteran Affairs
Department of Veteran Affairs
-- A Legislative History of the VA
Home
Loan
Guarantee Program
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