Traditional Loan Vs VA Loan Refinance

VA Refinance is basically a mortgage loan that has been made possible by a government program, where the federal government sells the federal government’s notes into the market so that the lenders have an alternative source of income. How does this relate to Traditional Loan or VA Loan Refinance?

As the industry recognizes that the traditional loan and home loan have become an anachronism, with banks offering thousands of products and loans all competing for consumers, they have created a “proper” and even “applied” term for the new mortgage loan and home loan. This new word for the loan is a “VA Refinance”. But what does this really mean?

You see, the federal government has offered a government sponsored loan to help finance the repayment of the home loans that were made by banks. So, if you are currently in the midst of a mortgage loan and want to refinance, and would like to take advantage of this program, you are better off by taking out a new loan instead of taking out a current mortgage loan. Also, the government program that gives you the new mortgage loan is called a “VA Refinance”.

You see, your current mortgage loan may have been purchased from a bank, or from a bank that then sold your mortgage back to you. The government paid the original bank for the sale of your loan to the federal government. In this instance, the VA and military loan lender would be in the business of offering loans to homeowners, but with the federal government as a counter party to the loan.

Now, the government has now taken on the role of a loan lender. What happens here is that they offer a loan, it is an interest only loan, and it has the added bonus of being backed by the government. But how does that affect your financial planning?

The current financial situation of most American homeowners is difficult enough, and if you are in the market for a new mortgage loan, there is no reason to have trouble with a government funded loan. With the government backing of your loan, you can choose any type of loan that you want, whether it is a Traditional Loan or a VA Refinance.