Unexpected Benefits Of A VA Loan
For those who have served in the Armed Forces, home loans guaranteed by the Department of Veteran Affairs often have the most favorable terms and conditions. Low down payments, competitive interest rates, and cheaper terms often make them a better option than conventional mortgages. However, a small minority of service members and veterans take advantage of the VA loan program; according to National Mortgage News, less than 12% of service members use VA loans.
Is a VA loan right for you? The following are four of the unexpected advantages of a VA loan.
Low interest rates and fewer fees
VA loans are designed to make homeownership affordable for service members and veterans. First, no down payment is required for purchase up to $417,000; even without a down payment, no mortgage insurance is required. Next, restrictions are placed on the kind and amount of closing costs that are allowed, making closing more affordable. Finally, VA loans have competitive interest rates – even for those with high debt or low credit scores. For most lenders, for example, VA loans qualify for the same interest rates as conventional borrowers with a 760 credit score and 20% down payment.
While the rates and fees are often better than a conventional loan, VA loans do have a funding fee. This can range from 1.5% to 3.3% of the total amount of the loan. However, the funding fee is added on to the loan; this means borrowers do not have to pay the funding fee upfront. Likewise, those with a service-related disability can have the funding fee waived.
Avoid overpaying with a VA-certified appraiser
The VA requires that all properties are inspected by a VA-certified appraiser before purchase. This helps service members avoid overpaying and helps ensure the house does not have any unexpected problems. The VA's Minimum Property Requirements include a list of safety, structural, and health requirements a property must meet; while the inspection requirements might seem stringent, they are designed to protect service members and their families from bad deals or shoddy workmanship.
Available help to avoid defaulting on the loan
Why are default rates on VA loans so low? Because unlike conventional loans, borrowers with VA loans have access to a number of programs for assistance and advice in the event they cannot make payments on their mortgage. Whether it is a sudden illness, lost job, or other unexpected financial problem, VA Regional Loan Centers offer financial counseling to service members designed to keep their homes out of foreclosure. This often takes the form of revised repayment plans; in extreme cases, the VA may opt for a deed in lieu of foreclosure, transferring the ownership of the property to the government and releasing the service member from financial liability.
Qualify for more than one loan
VA eligibility is not a one-time deal; service members can take out VA loans multiple times – and may even be able to have VA loans on two homes simultaneously. Because service members routinely relocate, they are able to take advantage of VA loans multiple times. Second loans may be taken out simultaneously depending on how much “entitlement,” or the amount the government will guarantee, is left on the benefit.
For service members, VA loans can make homeownership achievable. With favorable rates and terms and programs to help stay out of foreclosure, these loans are an excellent option for members of the Armed Forces.
by Author, May. 23, 2019