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Types Of VA Loans

With 3 Types of VA Loans You Can Get Just What You Need

With 3 Types of VA Loans You Can Get Just What You Need

Unlike FHA loans, there are not a lot of different VA Loan Programs.  The Veterans Administration has kept it simple! Like with conventional loans, a loan is a loan.

In fact, these are only three types of VA Loans:

Whether this is the first use of your VA benefits or a subsequent use affects the terms but not the type of loan you are getting.

“First Use Of Benefits” usually means that the interest rate and/or fees are lower and there is usually no down payment.

“Subsequent Use Of Benefits” usually means that the interest rate and/or fees are higher and there may be a down payment required.

That’s pretty much all there is for the types of VA Loans.  Unlike the FHA, the Veterans Administration and the U.S. Congress has kept it simple and easy to understand.

The biggest variable is created by the repayment options.

VA Loan Repayment Options

The VA will allow five different repayment methods to be written into the loans that it insures.

The allowable repayment options are

  1. Fixed Payment – This is the traditional fixed payment repayment option.  If you get this type of repayment plan, you will have a fairly consistent payment amount over the full term of the mortgage.  The only time your payment may change is if a charge that is included in your monthly payment like property taxes, property insurance or some other “escrow item” changes.  It is nice because it is very predictable.
  2. Graduated Loan Payment Mortgage – In this type of repayment plan, you will have lower but gradually increasing loan payments.  Loan repayment amounts become fixed during the 6th year of the loan.  This loan is great for young couples that need a break in the beginning but expect to increase their income over the years.
  3. Growing Equity Mortgage Loan – This works kind of like the Graduated Loan Payment Mortgage because the payments gradually increase.  However, the payment increase amounts are applied to the principle part of the loan… Not the interest.  This type of loan results in early payoff of the loan and saves you a lot of interest.
  4. Regular or Traditional VA ARM (Adjustable Rate Mortgage) – This is an adjustable rate mortgage with a limit on the increase to the interest rate.  The interest rate may go up only 5 percentage points over the life of the loan.
  5. Hybrid VA ARM (Adjustable Rate Mortgage) – This is a variable rate mortgage with a twist.  It is the same as the Regular VA ARM except that the first 3 years of the loan will have a fixed interest rate.  Then, at the lenders option, the rate may be increased up to two percentage points.  The increased rate must remain the same for 5 years.  Then, it becomes like a regular VA ARM.  The Hybrid ARM interest rate may only increase 5 percentage points over the life of the loan.