Different Types of Loans
Ready to buy your new home? The VA offers four loan types and each has its own requirements and limitations. Look at the different loan types and see which one makes the most sense for your situation.
Purchase Loan: This loan is for you if you’re looking to buy a home, make energy-efficient upgrades to your existing home, or buy property to build a home on. As of 2019, there is no maximum limit that you can borrow. However, mortgage lenders might limit the amount you can borrow based on four factors: income, credit history, debt-to-income ratio, and the maximum home price in your county. This loan is for a primary residence, so you can’t use it to buy a vacation home, a property to rent out to others, or a home that needs major repairs.
Interest Rate Reduction Refinance Loan: This is also sometimes called a streamlined refinance loan. You can use it for one thing: refinancing an existing VA loan. Refinancing can get you a lower interest rate, reduce the term of your loan, or change an adjustable-rate mortgage into a fixed-rate mortgage.
Cash-Out Refinance Loan: This refinancing option replaces your existing loan with a new loan that has new terms. It’s used to take equity out of your home. You can also use it to refinance a non- VA loan into a VA loan, which will generally come with better terms.
Native American Direct Loan: This loan is available to any veteran who is Native American (or whose spouse is Native American). You can use it to buy, build, or improve a home on federal trust land. As of January 1, 2020, there are no limits to the amount of money you can borrow except for the limits your mortgage lender places on creditworthiness. Contact a VA regional loan center for details.