When talk turns to the home loan program of the U.S. Department of Veterans Affairs (VA), it’s a safe bet that VA home loan advantages will be a major part of the conversation. Frankly, there’s plenty to talk about.
VA Home Loan Advantages
Launched in 1944 as part of the original Servicemen’s Readjustment Act, the VA’s home loan program was specifically designed to help American service members find the financing they need to become homeowners. As Military.com reports, the program has changed and evolved over the years to better suit the needs of those it serves, but its overall mission remains the same. While they’re called VA loans, the VA doesn’t make the loans. Instead, the VA sets guidelines for home loans made by participating private lenders and stands behind those loans with a government-backed guarantee. This backing reduces the risk lenders take and allows them to provide borrowers with a host of VA home loan advantages.
Opportunity for 100-Percent Financing
The prospect of coming up with a sizeable down payment can be daunting, and many would-be homebuyers delay their dreams for years as they try to put together the money. Fortunately, homebuyers using a VA home loan can cross that worry off their list and become homeowners without the wait.
With the opportunity to secure 100-percent financing for your home purchase via a VA loan, you don’t need a down payment. In fact, the VA says that nearly 90 percent of VA-backed home loans are made with no down payment.
Relaxed Requirements for Borrowers
Borrowers using conventional loans generally need excellent credit if they hope to secure a conventional loan with a winning interest rate and favorable terms. As Military.com points out, the requirements for VA loans are more forgiving. While borrowers still need enough income and credit to qualify for the loan that they’re seeking, the VA insists that lenders take a relaxed approach when evaluating borrowers. Lower credit scores and higher debt-to-income ratios aren’t necessarily roadblocks. And because these loans are backed by a government guarantee, even borrowers with an imperfect credit history will enjoy lower interest rates and better terms than they’d receive with a comparable conventional loan.
No Prepayment Penalty
Prepayment penalties can haunt borrowers who want to sell, refinance, or pay off their homes early. Fortunately, prepayment penalties are not allowed with VA home loans (source).
No Mortgage Insurance
Lenders often require mortgage insurance when borrowers make down payments of less than 20 percent (source). This insurance protects the lender if the homebuyer defaults, but it doesn’t really benefit the homebuyer. In fact, it can add hundreds of dollars to their monthly payments. VA loans never require mortgage insurance.
Limited Closing Costs
Closing costs are the fees paid to third parties for services needed to complete a real estate transaction, and they can quickly add up. But as MilitaryBenefits.Info reports, the VA imposes limits on the closing costs borrowers using VA loans pay. This helps keep the total cost of borrowing down.
An assumable home loan is one that can be transferred with all its existing terms to another eligible homebuyer. According to The Mortgage Reports, VA home loans are assumable, and that can come in handy if a homeowner decides to sell, especially if interest rates have risen since the home’s purchase. The prospect of being able to take over a loan with a low interest rate can make a property more appealing to new buyers.
Available Refinancing Options
Homeowners choose to refinance their property for a variety of reasons. They may be eager to secure a lower interest rate, a lower monthly payment, or better loan terms. Alternately, they may want to turn the equity they’ve amassed into cash. As MilitaryBenefits.Info reminds readers, the VA loan program offers a few different refinancing options.
Are you ready to learn more about VA home loan advantages? Turn to the friendly, knowledgeable professionals at PrimeLending: Manhattan, Kansas. We want to hear about your housing goals so that we can use our expertise to help you achieve them. Contact us today to get started.