Before we break down the specific types of VA loans available, we need to understand the difference between VA direct loans and VA-backed loans.
A VA direct loan is provided directly by the VA. Direct loans don’t require down payments but have higher fees than what you would get from the bank. VA loans can be used for a wide variety of purposes, although they are only for personal use. They can be used for:
- Buying a New Home
- Refinancing Existing Properties
- Remodeling Existing Properties
A VA-backed loan is provided by an organization outside of the VA. The VA is involved by guaranteeing a portion of this loan, which makes it easier to qualify for borrowers who would otherwise be ineligible. VA loan entitlement is usually 25% of the loan up to a conforming limit. This limit depends on which U.S. county you’re in, but it most often caps out at $548,250.
Unlike VA direct loans, VA-backed loans may require a down payment, although this is uncommon. Additionally, there are more requirements associated with securing VA-backed loans. These requirements differ depending on the lender, but common criteria include:
- Employment History
- Financial Stability
- Your Type of Income
Now that we better understand the difference between a VA-backed loan and VA direct loan, let’s examine the specific types of loans the VA offers: