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A VA loan is a mortgage loan that is backed by the Department of Veteran Affairs and is designed to help active-duty military personnel, veterans, and their spouses become homeowners. VA loans are available to eligible borrowers through private lenders such as banks, savings and loans, and mortgage companies.
One of the biggest advantages of VA loans is that they offer the opportunity to purchase a home with no down payment required. This can make homeownership more accessible for military personnel and veterans who may not have a large savings account or may have other financial obligations. In addition to purchase loans, VA loans also offer the option to refinance existing mortgages. Interest Rate Reduction Refinance Loans (IRRRLs), also known as VA streamline refinance loans, are designed to help borrowers refinance their existing VA loan to take advantage of lower interest rates or to switch from an adjustable-rate mortgage to a fixed-rate mortgage. Cash-out refinance loans allow borrowers to access the equity in their home for other purposes, such as home improvements or debt consolidation.
It’s important to note that while the VA guarantees a portion of the loan, it does not actually lend money for VA loans. Private lenders make the loans and the VA backs them up, which means that borrowers must meet the lender’s credit and income requirements in order to qualify.
VA loans are meant for the military personnel, military families as well as veterans. Following categories of people are eligible for VA loans:
- Active-duty personnel
- Members of reserve
- Members of National Guard
- Surviving spouses