If you’ve dipped a toe into the pool of mortgage possibilities, you’ve likely discovered that there are many different options for home loans. After all, the U.S. Department of Veterans Affairs (VA), the U.S. Department of Agriculture (USDA), and the Federal Housing Administration (FHA) all have home loan programs, and conventional loans come in a wide range of shapes and sizes. With so many choices, why get a VA loan? There are many reasons that aspiring homeowners who are eligible for VA loans opt for this popular form of financing.
Why Get a VA Loan?
Since the inception of the VA Home Loan Program in 1944, the VA has helped active-duty service members, veterans, and other eligible parties realize the American dream of home ownership by guaranteeing more than 20 million home loans, according to the Army Times. Why get a VA loan?
Favorable Interest Rates
The backing provided by the VA limits the risk that lenders take when they extend a VA loan. As a result, they are able to offer appealing terms to borrowers, including competitive interest rates. How competitive? USA Today reports that in 2016, conventional loans with fixed rates and 30-year terms had an average interest rate of 4.06 percent. Comparable VA loans had an average rate of 3.76 percent.
No Down Payment
A VA loan does not require a down payment. Without the need to save a sizeable down payment, borrowers who opt for a VA loan may be able to purchase a home sooner and with less hardship. Of course, that doesn’t mean that you can’t put money down if you utilize a VA loan. Borrowers using a VA loan may find that making a down payment smoothes the path to approval (source). It can also reduce the required funding fee.
If your credit history is either sparse or imperfect, a VA loan can be a good choice. The VA sets no requirements for a minimum FICO credit score, but it does allow lenders to set their own standards. Many lenders do look for certain scores; however, they are generally willing to accept lower scores when extending VA loans.
Limited Closing Costs
Closing costs can add up quickly. Fortunately for those who elect to use a VA loan, VA rules limit the amount that a borrower can be charged for closing costs. The closing costs associated with a VA loan are comparable or lower than those required for a conventional loan, and they can even be paid by the seller (source).
No Prepayment Penalties
With some loans, you’ll be charged a fee if you pay them off early. That’s not a possibility that borrowers using VA loans need to worry about. As the VA explains, lenders are not allowed to charge you a penalty fee for paying a VA loan off before the end of its term.
No Mortgage Insurance Requirements
Private mortgage insurance is insurance that protects the lender if a borrower defaults. If you use a conventional loan while making a down payment of less than 20 percent, you’ll be required to get it. FHA loans also have requirements for their own mortgage insurance. These insurance policies can increase your monthly mortgage payment significantly (source). Fortunately, VA loans don’t require private mortgage insurance, so you can potentially enjoy lower monthly payments and substantial savings over the life of your loan.
Mortgages tend to come with lengthy terms, and it’s not uncommon for the overall state of the economy and your own personal situation to change as time passes. Many homeowners consider refinancing as a way to deal with these changes. The VA offers two refinancing options, providing borrowers with flexibility so they can find the best option for their needs.
As Zillow reports, VA loans are assumable. Why does this matter? If you decide to sell your home, an assumable mortgage allows an approved buyer to take over your existing mortgage without changing its terms. This can be a fantastic selling point because it often allows the buyer to bypass the years when the amortization schedule devotes most of the monthly mortgage payment to interest. If interest rates have risen since you purchased your home, an assumable mortgage may also allow a buyer to secure an interest rate that is lower than the ones currently available.
There’s no denying that VA loans have several attractive features. Could a VA loan be the right choice for you? Let the expert team at PrimeLending: Kansas City help you explore the possibilities. Our experienced loan officers strive to make securing the right mortgage for your unique situation as simple and hassle-free as possible. At our branches located throughout Kansas City, we can help you explore our wide variety of loan products and programs, including VA loans. We can also help you further explore the question, “Why get a VA loan?” When you’re ready to get started, please give us a call at 844-701-5626 or contact us online.