The path to homeownership might seem particularly steep in a world where recessions happen, home values continuously increase, and student loan and credit card debt seem to only go up. Members of our military and veterans of the United States may face an even steeper slope. Members of our military are often serving during the years that most non-military Americans are building their credit, savings, and careers.
The good news is that there is a mortgage option that isn’t available to everyone. This loan is called the VA loan, backed by the Department of Veteran Affairs. VA loans provide a seamless route to home ownership for those who have served our nation in the military.
Here are the top 10 reasons why you should consider a VA loan over any other source of home financing.
No Down Payment Required for VA Loans
If you are an active service member or veteran who has not yet had the opportunity to acquire – or who can spare – the liquid capital typically needed to fund a down payment, closing costs, and other expenses associated with purchasing property, becoming a homeowner may seem to sit squarely in the realm of the impossible.
VA loans are designed to solve this problem. When you purchase a home with a VA loan, you may choose to put a down payment on your property when you make your purchase, but the VA loan eliminates the requirement of a down payment.
Funding Fee Flexibility With A VA Mortgage
Although you not be required to put a down payment on your home, the VA does charge a one-time funding fee. However, unlike a typical down payment, you are not required to have this funding on hand at the time of your home purchase. Instead, a VA loan allows you to finance that fee as a part of your total loan amount.
VA Mortgages Do Not Require Private Mortgage Insurance (PMI)
One of the most well-known expenses associated with minimal down payments on a home purchase is private mortgage insurance or PMI. Typically built into the mortgage payment as an added fee to guarantee the loan until the borrower has achieved 20% equity in the home, PMI can cost borrowers thousands of dollars of the life of the loan.
A VA loan eliminates the added PMI cost from your mortgage because the VA typically backs 25% of your financing. The backing of the VA serves as the necessary insurance needed by lenders, so the regular PMI expense is waived.
Limits on Closing Costs and Other Fees Associated with VA Loans
Your VA loan also protects your financial interests in different ways. While closing costs cannot be financed as part of your VA loan and must be paid upfront, the VA does allow the seller of your property to cover some of the closing costs. Seller concessions are allowed up to 4% of the amount (not to exceed actual closing costs).
More Lenient Credit and Income Requirements with VA Loans
VA borrowers must still bring adequate income and credit scores to their loan applications, but the standards for VA loans tend to be less stringent as those for a conventional mortgage.
Loan Flexibility Related to a VA Mortgage
VA loans were designed to make the home purchase process an easy one. VA loans offer flexibility in terms of the types of property you can finance and the nature of the loan you use to make your purchase.
The type of property purchased using a VA loan is up to you. The department of Veterans Affairs will back purchases of detached single-family homes, qualifying condos, and even buildings like duplexes and triplexes. The only caveat is that you must use the property as your primary residence. Your VA benefit does not apply to investment properties or vacation homes.
VA loans are backed by the Department of Veterans Affairs, but the funding of these loans comes from private lenders like banks and mortgage companies. For this reason, you can take your VA benefit to the lender of your choice.
No Prepayment Penalty With VA Loans
If you pay off your entire loan amount early, there is no associated penalty. Additionally, Standard Mortgage does not have a pre-payment penalty associated with VA loans.
VA Loans Do Not Have An Expiration Date
VA loans are not limited to first-time homebuyers. You may take advantage of your VA benefit many times throughout your life and under a variety of circumstances.
The VA Can Possibly Help You Avoid Foreclosure
No one purchases a home with the intent of failing to make their payments, and no one expects their home ownership to end in foreclosure. These things can happen to even the most responsible and conscientious borrowers. No matter the circumstances, you VA loan comes with support built in to help you through the troubled times.
The VA has financial counselors on hand to help walk you through the potential solutions. These financial counselors are trained to help you avoid foreclosure and retain your home.
You Can Assume and Refinance VA Loans
Unlike most mortgages, VA loans offer a unique benefit to qualified applicants. If you wish to sell your property financed with a VA loan to another applicant who is eligible for a VA loan, you may allow the buyer of your property to “assume” your existing loan. By assuming your current mortgage, the buyer would be able to lock in the positive attributes of your loan’s terms, like a low interest rate.
Alternatively, if you financed your home with a VA during a period of higher interest rates, you may be eligible to refinance your home to achieve a lower interest rate on your remaining balance. This refinancing benefit often helps borrowers reduce their monthly mortgage payments.
If you are in the market to purchase a home and meet the qualifications, make your home buying journey a pleasant one with a VA loan from Standard Mortgage (NMLS#: 44912).
