11/24/2010 If you’re a veteran and you’re planning to finance a home purchase, you’re likely eligible to take out a VA home loan. VA home loans are not originated by the Department of Veterans Affairs, but the VA does partially guarantee these loans, which allows lenders to offer them with much more favorable terms to borrowers.
VA loans have been discussed at length in other articles and will be discussed further in the future. For now, let’s look at the four major loan types that you can apply for with a VA home loan.
1. Fixed rate mortgages. One of the most common VA loan types is the traditional fixed rate mortgage. These are typically funded as either 15 or 30 year loans. These are the simplest loans to procure, and they will likely meet the needs of most veterans.
2. Adjustable rate mortgages. These are going out of style these days due to the recession, but you still have the opportunity to secure an ARM loan if you desire. These mortgages often come with the lowest mortgage rates attached, but the rates adjustable after a set period of time. You may find yourself stuck with a higher mortgage payment than you can handle if the rates adjust upward.
3. Graduated payment mortgages. These mortgages are similar to adjustable rate mortgages in that the borrower’s monthly payment increases over time. With a GPM, however, this increase is not tied to mortgage rates at all. The monthly payment is simply set to increase every year over a period of five or more years. These mortgages can be beneficial if you need to start out with a low payment due to low cash reserves.
4. Growing equity mortgages. These mortgages are very similar to GPM mortgages, but the key difference is that the initial payments with a growing equity mortgage are fully amortizing. There is never any negative amortization.
Veterans can also use VA home loans to refinance their homes or pay for home improvements. Find out what loan type meets your needs best by talking to a qualified local lender today.
