One of the most widely used perks of the military life is the VA Home Loan. In 2020, the Veterans Administration guaranteed over 1.2 million home loans. While the VA loan is not always the better deal, there are some very compelling reasons to use this great benefit!
No Down Payment
It often takes people years of saving to get the required down payment when using a traditional home loan. Many times, this down payment is a major stumbling block for those trying to become homeowners. Getting a home loan with no money down can be the difference in whether you can become a homeowner or remain a renter. This helps service members become first-time homebuyers sooner.
Competitive Interest Rates
The VA Home Loan interest rate is traditionally very competitive. Even though the loan is made through a private lender, interest rates tend to be lower than a conventional mortgage because the U.S. Government backs the loan. The loan rates and eligibility rules changed in 2020, so you can read about the recent changes to the VA Loan here.
No Mortgage Insurance
Private mortgage insurance or PMI typically costs between .05% and .01% of the home’s purchase price each year. Grab your VA Loan Home calculator for this part. Someone who purchases a $300,000 home with less than 20% down and a 1% PMI would pay approximately $1,000 a year or just over $83 a month. Not a huge amount, but it adds up. You can avoid this monthly bill by using the VA Home Loan.
The Veterans Administration places limits on how much military veterans can be charged in fees and closing costs. Also, other parties must cover some of these fees in the home sale transaction. This can make buying a home more affordable, and give you additional options.
No Penalties for Prepaying
One of the great advantages to the VA Home Loan is flexibility. You can sell or refinance at any time without having to pay a prepayment penalty or early-exit fee. This isn’t always available with a traditional loan. You should always discuss prepayment options with your lender so you are aware of any hidden penalties.
And it is one of the few loans out there that can be “assumed” by other VA Loan-eligible home buyers. Offering an assumable mortgage can allow you to charge more money for the transaction when you are ready to sell a home. You are offering a favorable loan to the buyer and they will sometimes pay a higher sales price to take advantage of your lower interest rate.
Backed by the U.S. Government
Although the VA Home Loan is provided by a private lender, such as a mortgage company, savings and loan association, or bank, the Veterans’ Administration guarantees a portion of the loan, which enables the lender to provide you with more favorable terms. Additionally, this guarantee means the lender is protected against loss if you fail to repay the loan.
It’s the Groundhog Day of loans! It is possible to have more than one active VA loan at the same time. And the VA home loan can be reused over and over again. Furthermore, VA requirements for a home loan even allow veterans to use their home-loan benefits a year or two after bankruptcy or foreclosure.
Carla Olivo has garnered numerous TV industry awards including the Associated Press award for Spot News Reporting, and Documentary Reporting. She lives in Northern Virginia with her husband, a retired USMC Lt. Colonel, and their two military brats. Follow her on Twitter @olivowriter.