Members of the military, whether on active duty, veterans, or otherwise eligible, have access to VA loans, which offer several benefits to borrowers. Since the U.S Department of Veterans Affairs backs these loans, lenders who provide VA loans are guaranteed payment even if the borrower defaults. And borrowers who may not qualify for a traditional mortgage loan have the opportunity to make their home buying dream come true with VA loans. Here are more benefits a VA loan has to offer:
No Down Payment
There are very few ways to purchase a house without a down payment, but VA loans will allow you to finance the full purchase price of the home. This is in comparison to other loan options, which typically require a down payment of anything from 3.5%-20%.
Keep in mind that although you don’t have to make a down payment when using a VA loan, you still need to consider the implications of funding your purchase with a 100% loan. You won’t have any equity in the house and will need to ensure you can afford to pay the higher monthly mortgage payments expected with a larger loan.
No Private Mortgage Insurance
Other loan types will typically require you to pay for private mortgage insurance if you don’t put down at least a 20% down payment. The fee for this insurance is added to your monthly mortgage payment until you have built 20% of the value of the home in equity.
You might also have to pay a funding fee unless you fall under one of the qualifications to waive it. Waivers are generally for veterans who are receiving VA disability compensation, or for the unmarried surviving spouse of a veteran who died while in service.
Qualifying for a VA Loan is Easier
All mortgage loan types have minimum standards borrowers must meet. These standards apply to credit history, debt-to-income ratio, credit scores, and other factors. Compared to other loan programs, the VA loan guidelines are much more flexible. If you don’t have a high credit score, you can still qualify for a VA loan. If you’ve had a bankruptcy or foreclosure in recent years, VA loans will be more forgiving towards your history.
Competitive Interest Rates
Lenders who work with VA loans feel more secure as the mortgage loans have the backing of the Department of Veterans Affairs should the borrower default on their mortgage loans, which allows them to offer a lower interest rate to borrowers. This rate can be 0.5%-1% lower than rates for conventional loans. This seemingly small difference can save you thousands of dollars in interest over the life of the loan.
Lower Closing Costs
The VA limits the amount that lenders can charge applicants for closing costs. These savings allow you to use the money for other purposes, such as for home improvements or towards the costs of moving.
No Prepayment Penalties
Some lenders will charge you a prepayment penalty for paying off your loan before the term expires. These penalties work to the benefit of the lender, in that they offset the loss of interest incurred. VA loans do not have a prepayment penalty.
The VA’s job is to advocate for veterans, and this goes beyond merely providing attractive loans. They also work to help veterans who are at risk of foreclosure keep their homes.
There are other benefits and factors to consider when deciding on the type of mortgage that’s right for you. NASB mortgage experts can walk you through all your options. Give us a call at 855-455-0753, or click here to start the journey towards your new home.