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 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 anywhere from 3.5% to 20%.
Remember 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 must ensure you can afford to pay the higher monthly mortgage payments expected with a larger loan.
No Private Mortgage Insurance
Other loan types 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 equity home.
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. The VA loan guidelines are much more flexible than other loan programs. You can still qualify for a VA loan if you don’t have a high credit score. VA loans will be more forgiving towards your history if you’ve had a bankruptcy or foreclosure in recent years.
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 home improvements or moving costs.
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 lender's benefit by offsetting the loss of interest. VA loans do not have a prepayment penalty.
Avoid Foreclosure
The VA advocates 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.
Here's a calculator to help determine your VA loan payments based on the purchased price, down payment, interest rate, military experience, and prior VA loan use. 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. Call us at 888-661-1982, or click here to start the journey towards your new home.
