Since its inception in 1944, VA loans have helped more than 24 million veterans across the US afford their own homes.
Apart from veterans, they’ve also helped active military members and surviving spouses to do the same. This makes VA loans one of the most viable mortgage options for war veterans and military personnel.
For those who qualify, VA loans are hands down the best type of mortgage to finance homeownership. With so many VA loan benefits, it’s hard not to apply for one if you meet the qualification criteria. So what are these loan benefits, and what sets VA loans apart from other types of mortgages?
In today’s post, we’ll be highlighting the many benefits of VA home loans and why you should apply for one if you qualify.
What Are VA Loans?
Before we get to the benefits, let’s first cover a few VA loan basics. So what are VA loans?
A VA loan is a type of mortgage loan available for military service personnel, veterans, and their survivors. This loan allows qualified individuals to apply for mortgages with no down payment, PMI, and competitive interest rates.
Here are the benefits of VA loans:
No Down Payment
The first benefit of VA loans is that applicants don’t have to pay a down payment. That’s right, the downpayment on VA loans is zero. This is unlike other mortgages where you have to pay a portion of the home’s total price as a down payment.
Although down payments usually form a small percentage of the home’s total price, they’re nowhere near cheap. With some mortgages, borrowers have to pay up to 30% of the mortgage amount. Although some down payments are as low as 5%, that’s still a lot of money compared to paying nothing.
VA loans will let you finance 100% of your home’s price. However, in cases where your credit score is wanting, you might have to pay a small down payment.
They Don’t Have Limits
Veterans Affairs (VA) removed loan limits for VA loans way back in 2020. This move allowed for more flexibility in terms of home choices for qualified individuals. It also allowed them to qualify for jumbo loans, which can exceed conforming limits for their respective housing markets.
Qualified individuals can now purchase their dream homes, regardless of their rank or current financial situation.
Super Lenient Interest Rates
To say that interest rates on VA loans are lenient would be an understatement. VA loans have some of the best interest rates compared to other types of loans, including mortgages. This means qualified applicants can save a bundle in interest costs by applying for a VA loan.
The interest rates on these loans are usually 1% lower than on conventional mortgages. Considering that there’s no down payment, this is more than a great deal; it’s simply out of this world.
Don’t Require Private Mortgage Insurance
Private mortgage insurance, or PMI, is an insurance type that loan borrowers have to pay on the loans they take. This insurance is meant to protect the lender from defaulting borrowers. When the borrower defaults, the insurance provider will pay the lender the full amount.
With VA loans, you don’t need a dime for private mortgage insurance. This further lowers your monthly expenses toward repaying the mortgage. Plus, PMI is a rather unnecessary expense when repaying your mortgage if you plan to make consistent monthly payments.
Lower Closing Costs
The United States Department of Veterans Affairs has stringent limits on how much closing costs lenders can charge applicants. Typically, lenders use closing costs to extort more money from borrowers. However, this can’t happen when you take out a VA loan.
You can use the amount you save from the reduced closing costs on furniture or moving expenses. Talk about saving money on your mortgage.
They’re Super Flexible
Everyone has a different idea of what their dream home would be like. Some people want large mansions with five baths, while others are happy with a single condo. Regardless of your choice, you can always trust a VA loan to finance the purchase.
VA loans are incredibly flexible in the types of properties they finance. Veterans and eligible applicants can buy condos, manufactured homes, mansions, and other types of homes. Unfortunately, you can’t say the same about conventional mortgages.
Plus, with no limit for VA loans, your dream home is a VA loan application away. However, you still have to find a reputable lender for the best VA loans.
VA Loans Are Assumable
An assumable mortgage loan means the borrower can transfer the outstanding loan amount to a house buyer that buys the house on a mortgage. As such, the buyer can assume the seller’s mortgage and doesn’t have to take out a new mortgage.
VA loans are assumable, and the borrower can transfer their loan to a future buyer. This is a huge advantage if you plan to sell your home in the future. However, it’s worth noting that you can only transfer your loan to a VA-eligible buyer.
Easy to Qualify for VA Loans
Applying for conventional loans can be hectic with all the documentation and appointments. While VA loans also require documentation, it’s nothing compared to what’s required for conventional mortgages. In fact, if you have enough income to cover your monthly mortgage costs and solid credit history, you’re good to go.
What’s more, VA loans are a lot less stringent in terms of requirements. This is mostly because these loans are backed by the government. The government will step in to pay for any payment you default on.
VA Loans Prohibit Prepayment Penalties
With many conventional mortgages, paying off your mortgage earlier will attract a prepayment penalty. However, the VA prohibits lenders from issuing prepayment penalties on VA loans. This means that if you have enough money, you can pay off the mortgage and get away scot-free.
Note that prepayment penalties are a way for lenders to recoup any losses they make when the borrowers pay off their loans early. Remember, if borrowers pay off their loans early, they don’t have to pay interest fees for the remaining months.
The VA Loan Benefits Simplified
Now that you know all the VA loan benefits, it’s up to you to apply for one ASAP. Remember, only veterans, serving military personnel, or survivors of the same can qualify for a VA loan. Find a reputable lender and apply for your VA loan today.
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