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14 Advantages Of A VA Home Loan
"The power behind the VA loan comes from a handful of significant financial benefits not typically found in other mortgage types."
VA loans are one of the most powerful mortgage options on the market for Veterans, active military and surviving spouses.
The power behind the VA loan comes from a handful of significant financial benefits not typically found in other mortgage types. These advantages compared to different loan options are a big reason why VA loan volume has grown considerably over the last 15 years.
Let's take a deeper look at the most significant VA loan advantages. 👇
1. No Down Payment
By far, the single-largest benefit of the VA loan is that qualified Veterans can purchase without a down payment. This huge advantage allows Veterans and service members to buy homes without having to spend years saving for that typical lump-sum payment.
2. No Private Mortgage Insurance
Private mortgage insurance (PMI) is insurance that protects lenders in case of a borrower default. Many conventional lenders require borrowers to pay private monthly mortgage insurance unless they can put down at least 20 percent, which is challenging for many Veterans. Conventional borrowers will need to pay this monthly fee until they build 20 percent equity in the home.
3. Competitive Interest Rates
Here’s another big way the VA loan program saves Veterans money: Having the lowest average fixed rates on the market.
VA loans have had the lowest average 30-year fixed rate on the market for the last six years, according to data from ICE Mortgage Technology.
VA interest rates are typically 0.5 to 1 percent lower than conventional interest rates. Lower rates help Veterans save every month and over the life of their loan.
4. Relaxed Credit Requirements
Since the Department of Veterans Affairs only oversees the loan program and does not issue loans, the agency does not set or enforce credit score minimums.
5. Closing Cost Limits
All mortgages come with fees and closing costs, but the VA actually limits what Veterans can be charged when it comes to these expenses. In fact, some costs and fees must be covered by other parties in the transaction. These safeguards help make homeownership affordable for qualified homebuyers.
6. Lifetime Benefit
One of the most common misconceptions about the VA mortgage program is that it's a one-time benefit.
Veterans who qualify for a VA loan can use this program over and over again, and the benefit never expires. Unlike what you may have heard, you don't necessarily have to pay back your VA loan in full to use your benefit again.
7. No Prepayment Penalties
With some types of loans, paying off a home loan before it matures results in a pre-payment penalty. This is because lenders miss out on additional opportunities to collect interest payments. The prepayment penalty is a way for financial institutions to recoup some of that money.
The VA loan allows borrowers to pay off their home loan at any point without having to worry about a prepayment penalty.
8. Foreclosure Avoidance
VA loans are one of the safest loans on the market and have been for more than a decade. That's pretty remarkable considering that about 8 in 10 homebuyers don't put any money down.
The VA mortgage program has emerged as a safe harbor for several reasons, including the VA's residual income guidelines. The VA has also done a tremendous job advocating for Veterans in jeopardy and working to ensure they stay in their homes.
The VA guaranty program isn't just about getting Veterans into homes. It's also focused on helping Veterans keep them.
9. The VA Appraisal
The VA appraisal is a required step of the homebuying process to assess the property’s value and condition. The appraisal serves two purposes: establish an appraised value for the home and ensure the home meets the minimum property requirements.
Establishing an appraised value verifies the home is priced at “fair market value.” This means the home is priced similarly to houses of the same size, age and location. The VA appraisal gives borrowers peace of mind that their home was purchased at an appropriate price.
It might be easier to get pre-approved for a mortgage than you ever imagined. We believe in making it as easy as possible for everyone to purchase their own home. Click here now to get started, it only takes a few minutes online.
10. Acceptable Income
Verifying income is an essential step in the VA loan process. Lenders want to make sure the prospective borrower can comfortably afford their new monthly mortgage payment. Luckily, many VA lenders will accept multiple forms of income, such as BAH, Service Related Disability and Retirement.
11. Variety of VA Loan Types
Many Veterans are surprised to hear how many financing options the VA loan benefit has. Not only can Veterans purchase a home with their VA loan benefit, but they can also make energy-efficient upgrades, take equity out of their home and refinance into lower interest rates.
12. No Loan Limits
While VA loan limits used to be enforced for all Veteran homebuyers, that is no longer the case. Now, Veterans with their full VA loan entitlement can borrower as much as they can afford without the need for a down payment.
13. Funding Fee Exemptions
The VA Funding Fee is a required governmental fee applied to every VA loan. The money goes directly to the VA to help cover any losses and keep the VA loan guaranty running. While most borrowers pay between 2.3 percent and 3.6 percent, some Veterans are exempt altogether.
14. Assumability
VA loan assumability is not something many homebuyers think of when it comes to benefits, but it is still a compelling benefit of the VA loan program. A VA loan assumption is a purchase transaction where the purchaser takes over the seller’s existing mortgage.
Tina Ballinger - NMLS# 1284833
It might be easier to get pre-approved for a mortgage than you ever imagined. We believe in making it as easy as possible for everyone to purchase their own home. Click here now to get started, it only takes a few minutes online.
Tina Ballinger
Mortgage Expert
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Tina Ballinger, Mortgage Expert
NMLS# 1284833
