VA purchase loans are loans made by private lenders and supported by the US Department of Veterans Affairs (VA).

With a VA home purchase loan, eligible U.S. veterans, active duty service members and surviving spouses can purchase their own home.

Like other types of VA loans, VA purchase loans show special benefits eligible for regular home loans, including competitive interest rates and more flexible loan results and lower repayment requirements than conventional loans.

What can you do with a VA purchase loan?

VA purchase loans are a great option for first-time or experienced homeowners to qualify for VA borrowers in the market.

If you increase the reliability of the property, you can use a VA mortgage to cover the cost of a home, build one, or upgrade an existing home.

What can you buy with a VA loan?

The Department of Veterans Affairs has special guidelines on what types of property can be purchased with a VA purchase loan.

First, the property must be the borrower’s first home or close family (spouse or children). This means that investment assets are not eligible unless the borrower lives in the home.

Second, VA purchase loans can only be used for authorized asset types. Acceptable assets approved for VA purchase loans include:

  • Single family home, up to 4 rooms
  • Manufactured house or lot
  • Condo in a VA-approved project
  • New home construction

Finally, in order for a property to be approved by VAA, it must meet the Agency’s minimum asset requirements (MPRs) to ensure a ready and safe investment. MPAs are generally evaluated during the VA assessment process.

Some minor asset requirements for VA loans include:

  • Adequate living space
  • Have safe and adequate pedestrian or vehicle access
  • Reliable and practical drainage systems
  • Safe topography (to prevent mudslides, flooding or sinks)
  • Pest free, rotten or fungus
  • Have a practical heating supply
Ads by money. We may be compensated if you click on this notice.Advertisement

Are you ready to take the next step and buy your new home?

For veterans, active members of the service, and surviving couples, VA mortgages can help make home buying more affordable.

get started

VA loan benefits

VA mortgages offer a variety of benefits over conventional mortgage loans.

Although the Department of Veterans Affairs does not initiate loans, it guarantees VA. VA is the amount of dollars that your VA lends to your lender when you do not process your loan. Overall, the VA promises a loan rate of up to 25%.

In turn, VA guarantees the confidence of private lenders to provide exclusive benefits to eligible VA borrowers, including non-lending and competitive interest rates and terms.

Some of the benefits of VA purchase loans are as follows

There are no loan restrictions

VA borrowers with full rights do not have credit limits. VA entitlement refers to the amount of dollars that the Department of Veterans Affairs verifies in your VA loan. If you are not defaulting on your loan, VE will pay your lender the amount of dollars you owe.

If you get less than full entitlement, you can borrow up to your county’s free credit limit. Meeting credit limits is set annually by the Federal Housing Finance Agency (FFA), and includes general and high-cost loan restrictions in the United States.

If you save money, you may be able to borrow more than is appropriate for your county loan. Credit limits may change from year to year, so be sure to check with FHFA.

There is no prepayment

As long as the purchase price does not exceed the estimated value of the home, you can avoid the down payment. However, prepayment on a VA loan can reduce your interest rate and the total cost of the loan.

Competitive interest rates

The U.S. Department of Veterans Affairs guarantees a portion of your loan to private lenders, so you take less risk as your borrower. As a result, VA loans often show lower mortgage rates than conventional loans.

There is no mortgage guarantee

VA purchase loans do not require private mortgage insurance (PMI) or mortgage insurance premium (MIP). Instead, you must provide a one-time payment to the Department of Veterans Affairs with VA funding.

VA funding can range from 1.4% to 3.6% of the purchase price. Cash payments can be paid in advance or rolled into your monthly mortgage payments. In some cases, such as permanent disability, VA funding may be waived altogether.

Low closing costs

Closing costs for VA loans generally range from 3% to 5% of the total cost of the loan. With VA Purchasing Loans, you will have an unwanted benefit that you will not have to pay in advance or pay off mortgage insurance.

Under the VA, sellers can contribute up to 4% of your loan closing costs. VA loans on VA loans may include VA cash payments, loan balances, prepayment taxes and payments on property or mortgage points.

There are no advance penalties

Unlike conventional loans, government-sponsored VA, USDA and FHA loans do not charge advance penalties. Prepaid penalties are some lenders that pay off your mortgage – or part of it – in advance.

Since it is a VA loan article, I think we are also going to omit the explanation of how prepayment penalties apply to regular loans.

Easy to renew

Adjusting your VA loan with interest-bearing loan (ARRL) is easier than repaying a regular home loan. IRRRL loans, often called VA “Referral Improvement” loans, have a simple sub-process designed to reduce fees and time.

Generally, VA amendments do not require a VA review or much paperwork to be approved. VAA uses the document on file to easily speed up the pre-writing process.

Eligible borrowers apply for a VA cash withdrawal loan. With VA Refinance, you can re-upgrade your existing loan-VA, conventional or FAA, as long as you meet military service requirements.

Unlike IRRRL, to qualify for a VA cash release loan, you must have your home assessed and meet both lender and VA eligibility requirements.

If you are interested in refinancing your VA loan, read How to Redeem VA Loans for more details.

Lifetime benefit

As long as you meet the eligibility requirements set by the VA, VA insurance is a lifelong benefit that you can often use.