What Are the Different Types of VA Loans?

Soldier and wife discuss VA loan options.

The Department of Veterans Affairs backs home loans issued by private lenders for military service members, veterans, and their surviving spouses. There are several different types of VA loans that eligible borrowers can apply for.

Purchase loans

  • Fixed-rate mortgage: Fixed-rate mortgages have an interest rate that is set when you take out the loan and remains constant for the entire loan term. Fixed-rate loans offer predictability for homeowners, who can reliably budget their monthly payments over the long term.
  • Adjustable-rate mortgage: An adjustable-rate mortgage has an interest rate that changes. ARMs usually start with a lower interest rate than fixed-rate loans. That introductory rate expires after a few years, and then the interest rate on the loan adjusts according to market conditions — usually once a year. Rate increases will raise your monthly payment, and drops will lower it.
  • Native American Direct Loan: This type of loan helps Native Americans and their spouses buy, build, or improve a home on trust lands, such as a Native American reservation. Unlike other types of government-backed loans, it’s issued directly by the VA instead of through a private mortgage lender.

Refinance loans

  • Cash-out refinance: A cash-out refinance lets you take advantage of the equity you’ve built in your home. You take out a new mortgage based on your home’s current value, repay the original loan, and keep the difference as cash. Unlike refinancing a conventional loan or a mortgage backed by the Federal Housing Administration, VA cash-out refinances allow you to take out up to 100% of your home’s equity.
  • Interest rate reduction refinance loan: An IRRRL allows you to refinance your VA loan to a lower interest rate or switch from an ARM to a fixed-rate mortgage. This can help you lower your monthly payment and reduce the total amount of interest you pay.

Other loans

  • Renovation and home improvement loan: A VA renovation loan lets you borrow money to buy and improve a property. That way, the renovations are financed as part of your home loan. This loan type is not offered by all lenders.

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