A VA home loan is one of the best loan options for veterans and active military members; this is mostly because it is getting harder for military borrowers to build the assets and credit required for traditional mortgages. VA home loans have many advantages, which make them a great option.
Here are the unbeatable VA home loan benefits:
No Down Payment
If you are a qualified veteran, you can get a VA home loan without having to make any down payment. This means that you can make significant monthly savings. On conventional loans, you have to make a 5% down payment and on FHA loans, you have to pay a minimum down payment of 3.5%.
The advantage of a VA loan is that you can get the house of your dreams without having to work for years to save for a down payment. If you are in the military, you do not have to wait for years before buying a home.
Competitive Interest Rates
Because the Department of Veterans Affairs guarantees a portion of your loan, you will get better interest rates. You can get interest rates that are 0.5-1 percent cheaper than those of conventional loans. Because the VA provides lenders with a sense of security, they will feel more comfortable charging low rates that are competitive.
For instance, if you have taken out a thirty-year mortgage of 250,000 dollars, a rate that is 0.75% cheaper could mean savings of 40,000 dollars over the life of your loan.
No Mortgage Insurance
Unlike other loans, a VA loan does not need monthly insurance. If you borrow a loan from a bank without putting down a 20% down payment, you will have to pay private mortgage insurance. This additional fee will be added to your monthly payments until you get 20 percent equity in your home. Although the costs of mortgage insurance vary widely, you can end up paying up to 100 dollars more per month.
Relaxed Credit Requirements
Because VA never issues the loans directly but only oversees them, it does not implement credit score minimums. However, the lenders will look at you credit rating to determine your risk of defaulting; this means that you should have a score of at least 620. However, borrowers of conventional loans have to meet stricter terms and should have credit scores that are at least 50 points higher.
As a veteran or active military member, you do not need to have great credit to get financing for your home. Moreover, VA loans tend to be more forgiving in terms of bouncing back after foreclosure or bankruptcy.
Closing Cost Limits
Every mortgage has different closing costs and fees. When you get a VA home loan, the VA limits the amount that you can pay towards closing costs. The other parties that are involved in the transaction pay some of these fees and closing costs. These safeguards make it easier for people to own homes.
As a VA borrower, you can ask the seller to pay his or her loan-related expenses as well as up to 4 percent in concessions to cover things like insurance and prepaid taxes. Although the seller might not agree to your request, it will certainly not hurt to ask.
No Prepayment Penalties
You might not realize how much money you can save if you pay off your mortgage early. Prepayment penalties are designed to protect the lender from losing years of interest. Fortunately, you can repay your VA loan early without penalties.
The above benefits of a VA home loan are enough to convince veterans and active military members to take out the loan.