Veteran Affairs mortgages, or VA Loans, offered by private lenders are guaranteed by the Department of Veterans Affairs, and are availed by veterans, active military members and the spouses of military members who died while on duty.
Features such as loan with zero down payments, absence of Private Mortgage Insurance, competitive interest rates and exemption from payment of funding fees attract borrowers to opt for VA Home Loans.
No Upfront Requirements
Unlike in FHA Loans or Conventional Loans, where borrowers shell out 3.5 – 20 percent as upfront, a VA Loan does not require upfront payment, as the federal guaranty backs a portion of the loan.
No Worry on Credit Score
VA Home Loan is far easiertoo simpler to avail than a conventional loan as the credit score you need will certainly be much lower than what you may have to come up to avail conventional mortgages.
Save Insurance Costs
Since VA Loans are guaranteed by the Department of Veterans Affairs, there is no need for Private Mortgage Insurance and this effectively cuts down costs.
As VA guaranty offers greater degree of flexibility, interest rates on VA Loans are lower, compared to other types of loans.
Isn’t it true that even a 50 basis points difference is a good incentive for the borrowers? Willingness to come up with a down payment will bring the rates further down.
Save on funding fee
For first time VA Home Loan borrowers, the funding fee is just 2.15 percent of the purchase price and for a second loan, it is slightly higher at a little over 3 percent.
Veterans getting disability compensation are exempt from paying Funding Fee. Surviving spouses of military men who died while in service are exempt as well.
VA Inspects Property
Since the VA inspects the home, structural and safety standards are not compromised. The VA requires a pest-free certificate and all these expenses are borne by either the VA or the seller.
No Prepayment Penalty
No one likes to stay in debt for long. By repaying the loan early, the borrower can save a lot as the lender cannot impose prepayment penalty.
VA Loans Are Assumable
Selling the home even when the property is under VA mortgage is quite simple as the lender is mostly agreeable to allow a new borrower to take over payments. In some cases, the property is shared with FHA loans too.
Flexible Loan Entitlement
A veteran can go in for a second or even third loan during his lifetime. The VA program does not require the earlier loan to be paid back before the second loan is sought. The borrower is allowed to hold two loans at the same time.
Borrow Again Even After Foreclosure
A veteran is eligible for a fresh loan even after foreclosure of an earlier VA Loan. The eligibility criteria depend on the amount of loan entitlement he still holds.
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