The Veterans Administration (VA) assists active-duty service members, veterans, and eligible surviving spouses by guaranteeing portions of home loans provided by private lenders. Their powerful and flexible support can open doors otherwise unavailable to struggling families, helping them buy or refinance a home. More and more service members are turning to VA loans for help on their road to becoming homeowners. In fact, the VA set a record high in 2016 by guaranteeing more than 707, 000 loans. So if you haven’t yet explored the benefits of a VA loan, we encourage you to check your eligibility and learn why this program is growing in popularity all the time.
Benefits of a VA Loan
No Down Payment Required
If you decide to use a loan guaranteed by the VA, you won’t have to worry about the size of your down payment – because you won’t need to put down a down payment at all! This is one of the most cherished benefits of a VA loan. In most cases, mortgages backed by the VA do not require a down payment. For service members struggling to save money and build credit because they’re constantly moving from place to place, this benefit is invaluable. Without spending a dime, eligible borrowers can finance an entire home.
Conventional loans, on the other hand, typically require a 5-percent down payment, and FHA loans require a 3.5-percent down payment (source).
No Private Mortgage Insurance Required
VA loans do not require private mortgage insurance (PMI), an insurance that protects the lender in case the borrower defaults. In backing all VA loans, the federal government assumes the risk of a potential default, making PMI unnecessary. Thus, you won’t need to pay monthly insurance premiums. Over the life of a loan, this will save you thousands of dollars.
FHA loans, on the other hand, require both an upfront cost (included in your closing costs) and monthly charges (included in your monthly mortgage payments). Conventional loans typically require PMI if the borrower’s down payment is less than 20 percent (source).
Limitations on Buyers’ Closing Costs
The VA loan program limits buyers’ closing costs. In addition, borrowers may ask sellers to pay all of their loan-related closing costs as well as up to 4 percent of concessions. Although the seller may not agree to this, it can play a part in negotiations.
Lower Interest Rates
Interest rates on mortgages typically rise due to the risk the financial institution must assume to finance the loan. Since VA loans are guaranteed by the VA, they carry less risk and thus have lower interest rates. VA loans consistently offer interest rates about 0.5 to 1.0 percent lower than conventional mortgages (source).
No Prepayment Penalties
Want to pay off your loan early? No problem! With a VA loan, you can pay off your loan before it matures without suffering any financial penalties. Typically, lenders punish borrowers that pay off their loans early because that means they will receive fewer interest payments. If you plan to pay off your loan before it matures, consider a VA loan.
Once you’re certified, you can use the VA’s loan guaranty on a variety of real estate opportunities. Purchasing a new home is not your only option. You could also build or remodel a residence, purchase a condominium or duplex, purchase a manufactured home or lot, refinance an existing home loan, or install energy improvements (source).
Looser Credit Score Requirements
In addition to the advantages listed above, note that most lenders will accept a lower credit score for a VA loan as opposed to a conventional loan. Since VA loans were created to assist the men and women who serve our country in the armed forces, the government recommends that private lenders assess borrowers’ credit and financial situation charitably, looking at the whole picture before deciding whether or not to approve the loan request.
So what are you waiting for? If you’re ready to enjoy the many benefits of a VA loan, find out if you’re eligible today by contacting PrimeLending: Manhattan, Kansas. Every year, we help thousands of veterans and active-duty members of the military buy or refinance their homes through the VA home loan program. With our assistance, you can take advantage of the many benefits of a VA loan while saving money due to our lack of lender fees. We offer 100% financing with competitive interest rates – no down payment or PMI required! To learn more, please give us a call at 785-560-3011 or contact us online. It’s our turn to serve you!