BENEFITS OF A VA MORTGAGE LOAN
After service members confirm they are eligible and obtain the proper paperwork, they are closer to attaining one of the most valuable benefits available to them. VA Loans have a number of benefits including but not limited to the following:
- Purchase, refinance, or get cash out of your home’s equity
- Get lower rates and payments
- No money down and no PMI
- Simple, flexible way to maximize your entitlement
No Down Payment
One of the main benefits of VA loans is that no down payment is required as long as the sales price doesn’t exceed the appraised value. Traditionally, the minimum down payment for an FHA loan is 3.5% and for a conventional loan is 5%. For a $200,000 mortgage, the down payments would be $7,000 for FHA and $10,000 for conventional. This benefit allows borrowers the opportunity to be homeowners without spending years of struggle and saving for a considerable down payment.
No Private Mortgage Insurance (PMI)
A Private Mortgage Insurance (PMI) form is required for most borrowers pursuing conventional or FHA loans. PMI protects the lender from borrowers who default on their loan. Since part of every VA loan is backed by the federal government, if a service member defaults on a loan, the federal government agrees to pay back a portion of the loss. In 2012 alone, the U.S. Department of Veterans Affairs estimated borrowers saved around $19 billion in mortgage insurance costs.
Competitive Interest Rates
Because each VA loan is backed by the federal government, lenders carry less risk and may offer lower rates. VA loans tend to have lower average rates compared to both FHA and conventional mortgage loans. Ultimately rates will vary depending on credit, the lender and other factors.
Closing Costs
Closing costs are inevitable regardless of the loan type. But qualified VA loan borrowers are limited to the types of closing costs that they are allowed to pay. Non-allowable fees that VA borrowers do not have to pay include broker fees and costs for lender document processing. Since these and other closing costs may be necessary for the loan, it is important to note that they are not omitted from the process. Instead, the cost is covered by other parties in the transactions.
Access to a VA loan is one of the most valuable benefits available to current and former service members. For over 70 years, VA loans have helped millions of veterans and service members attain their goals and become homeowners. Through government backing and various benefits, VA loans offer options for qualified borrowers to reduce costs. Just like any other loan, it is important that borrowers are thorough.
If you are currently in the military or have served, thank you for your service. Understand the benefits and requirements of VA Mortgage Loans. Take advantage of this valuable benefit that can make it easier for more service members to realize their goals of home ownership!