VA loans are among the most potent and flexible lending options on the planet. The Department of Veterans Affairs guarantees about a quarter of a qualified borrower’s mortgage. That guarantee is what spurs VA-approved lenders to dole out loans and competitive terms to military buyers.
VA Loan Uses
Qualified borrowers can use a VA loan to purchase, construct or refinance a home. They can buy and repair a home at the same time. They can use a VA loan just to repair a home. Other acceptable uses include:
- To refinance an existing VA-guaranteed or direct loan
- To buy a single-family residential unit in a VA-approved condominium development
- To buy a farm residence owned and occupied by the veteran
But these powerful home loans do come with some limitations. Veterans and active-duty military cannot use a VA loan to purchase land or investment properties. A home purchased with a VA loan must be the buyer’s primary residence.
Benefits of VA Loans
VA loans were created to spur lending to military homebuyers, a deserving demographic that can at times struggle to build a solid financial profile because of frequent relocation and overseas deployments.
They’re also a small way to give back to those who have sacrificed so much. In that spirit, VA loans come with some significant financial benefits. The biggest one is what the program has become known for — no down payments.
Qualified borrowers can purchase a house worth up to $417,000 (and even higher in some of the country’s costlier communities) without putting down a single dollar. About 80 percent of veterans who have used the program cite this as its No. 1 benefit.
VA loans also do not require private monthly mortgage insurance. Some other key benefits include:
- Less stringent qualification guidelines
- No pre-payment penalties
- Higher allowable debt-to-income ratios than conventional loans
- Sellers can pay up to 6 percent of closing costs and concessions
About 8 in 10 VA loan borrowers could not have qualified for a conventional loan.
Next time, we’ll take a look at VA loan eligibility and the VA loan limits.