At VA Home Loans of Idaho, we understand how there may be some questions that arise before applying for a VA loan. Our job is to help you through the mortgage loan process, making that transition as easy and as stress-free as possible. Before filing for a VA loan, one should know about the multiple types of loans that exist:
- Purchase loans
- Interest Rate Reduction Refinance Loans (IRRRL)
- Cash-out refinance loans
Having more knowledge about these loans might help make the decision process easier. At VA Home Loans of Idaho, we wish to provide you with expert knowledge on these types of loans so you’re confident in which route is best for you!
Purchase Loans
Wondering if applying for a VA purchase loan is the right decision? The number of benefits it comes with might convince you! With this specific type of loan, the perks coming with it include no down payment, better terms and interest rates, fewer closing costs, and the ability to receive no penalty fee in case you pay off your loan early. The usage of the loan can also be used towards purchasing a single-family home (up to 4 units), building a new home, adding or improving to your home, along with being able to buy a manufactured home or lot! Although this seems pretty advantageous, do keep in mind that there will be some costs that are associated with this loan. One of the expenses you may run into is the VA funding fee. This fee is simply a one-time payment that helps lower the cost of the loan for taxpayers in the United States. Lastly, note that your lender will charge an interest rate on the loan along with a closing fee.
If a VA purchase loan seems like the path for you, give us a call! Our team is more than happy to help you and your family through the process!
Interest Rate Reduction Refinance Loans
This other type of VA loan specifically targets reducing your monthly mortgage payments along with the interest rates in which you pay. However, one can only use this loan – referred to as a “streamline loan” or a “VA to VA” – if you already have an existing VA-backed home loan. By using an Interest Rate Reduction Refinance Loan (IRRRL), it can help put some needed cash back in your pocket by converting your adjusted or variable interest rate to one that’s fixed! Like most loans, the process of applying takes multiple steps:
Find a lender
Give your lender any needed information (Certificate of Eligibility used to get your VA-backed home loan)
Pay your closing costs and follow the lenders closing process to claim your IRRRL loan
This specific type of streamline refinance is a good choice for military homeowners looking for a quicker process and less documentation… resulting in a speedier application process! If you’re still wondering if it’s the right decision for you, don’t hesitate to reach out to us at VA Home Loans of Idaho!
Cash-Out Refinance Loans
Unlike an Interest Rate Reduction Refinance Loan, a Cash-out refinance loan can be used without needing a VA-backed home loan… assuming you still meet the eligibility requirements for the loan itself. This type of loan is typically applied for when needing to refinance your current mortgage or when needing extra cash, granting you the ability to draw upon your home’s equity for cash. For military homeowners, this allows them to use the extra cash on home improvement projects, education purposes, pay off debt, and other reasons. However, do keep in mind that most loans also contain drawbacks. In this case, military homeowners applying for this loan should know that the interest rates will most likely be higher due to banks seeing this type of refinance option as a riskier route. Along with that, applicants will see a stricter application process and should keep in mind that this type of loan requires a VA funding fee as a security for the government-backed loan. Nonetheless, this choice is still a great option if you’re looking to cash in on your home’s equity for whatever need that arises.
We understand how there may be some questions that arise when applying for a VA loan. At VA Home Loans of Idaho, we want to ensure that you have a friend in this process, and want to help make this transition as straightforward as can be. Reach out to us to see if a VA loan is the right choice for you and your family!
