VA loans are one of the very most powerful mortgage options on the marketplace for Veterans, active military and surviving spouses.
The energy behind the VA loan comes from a small number of significant financial benefits not typically within other mortgage types. These advantages compared to different loan options are a major reason why VA loan volume has grown considerably during the last 15 years.
This historic benefit program has helped an incredible number of Veterans, service members and military families achieve the imagine homeownership. Because of this, VA loan use has soared since the Great Recession, and these government-backed loans are arguably one of the better mortgage products available today.
Let’s have a deeper go through the most crucial VA loan advantages.
1. No DEPOSIT
Probably, the single-largest benefit of the VA loan is the fact qualified Veterans can buy without a deposit. This huge advantage allows Veterans and service members to buy homes and never have to spend years saving for that typical lump-sum payment.
The minimum deposit amount on an FHA loan is 3.5 percent, and for conventional financing, it’s 5 percent. Over a $250,000 mortgage, a military borrower would have to come up with $8,700 in cash for an FHA loan and $12,500 for an average conventional loan. Those can be significant sums of cash for the average military borrower.
Saving cash and building credit can be problematic for service members who are constantly on the road. Using the VA loan, qualified borrowers can finance completely of the home’s value without putting down a dime.
2. No Private Mortgage Insurance
Private mortgage insurance (PMI) is insurance that protects lenders in case there is a borrower default. Many conventional lenders require borrowers to pay private monthly mortgage insurance unless they can deposit at least 20 percent, which is challenging for most Veterans. Conventional borrowers should pay this monthly charge until they build 20 percent equity in the house.
FHA loans feature their own form of monthly mortgage insurance.
Unlike conventional and FHA loans, VA loans don’t require monthly mortgage insurance. No private mortgage insurance means Veterans who secured a VA loan this past year helps you to save billions in mortgage insurance costs over the life of the loans.
3. Competitive INTEREST LEVELS
Here’s another big way the VA Loan Programs saves Veterans money: Getting the lowest average fixed rates on the marketplace.
VA loans have had the cheapest average 30-year fixed rate on the marketplace going back six years, according to data from ICE Mortgage Technology.
4. Relaxed Credit Requirements
Because the Department of Veterans Affairs only oversees the loan program and does not issue loans, the agency will not set or enforce credit history minimums. However, most VA lenders use credit history benchmarks to help assess a borrower’s threat of default.
Credit history cutoffs may differ, but the minimums are usually less than what borrowers dependence on conventional mortgages.
5. Closing Cost Limits
All mortgages include fees and closing costs, however the VA actually limits what Veterans can be charged as it pertains to these expenses. Actually, some costs and fees must be included in other parties in the transaction. These safeguards help to make homeownership affordable for qualified homebuyers.
VA borrowers can ask a seller to pay all their loan-related closing costs or more to 4 percent in concessions, which can cover things such as prepaid taxes and insurance, paying off collections and judgments and even more.
There is no guarantee owner will consent to that request, but Veterans can simply ask through the negotiation process.
6. Lifetime Benefit
One of the most common misconceptions about the VA mortgage program is that it’s a one-time benefit.
Veterans who be eligible for a VA loan can use this program over and over again, and the benefit never expires. Unlike what you might have heard, you do not necessarily have to repay your VA loan in full to use your benefit again.
It’s even possible to have more than one VA loan at the same time with second-tier entitlement.
Don’t feel that employing your mortgage loan benefit decades ago means you’re no more eligible or that because you have a VA mortgage at your present duty station means you can’t purchase again with a VA loan when you PCS in the united states.
Start my VA loan with Veterans United MORTGAGE LOANS — the country’s #1 VA purchase lender.
7. No Prepayment Penalties
With some types of loans, paying down a mortgage before it matures ends up with a pre-payment penalty. This is because lenders lose out on additional opportunities to acquire interest payments. The prepayment penalty is a means for financial institutions to recoup a few of that money.
The VA loan allows borrowers to repay their home loan at any point and never have to worry about a prepayment penalty. Borrowers are free to consider future home purchases and refinancing options with the lack of a prepayment penalty.
8. Foreclosure Avoidance
VA loans are one of the safest loans on the marketplace and also have been for greater than a decade. That’s pretty amazing considering that about 8 in 10 homebuyers don’t put any money down.
The VA mortgage program has emerged as a safe harbor for many reasons, including the VA’s continual income guidelines. The VA has also done a significant job advocating for Veterans in danger and working to ensure they stay static in their homes.
The VA guaranty program is not only about getting Veterans into homes. It’s also centered on helping Veterans keep them.