There are several benefits that come along with qualifying for a VA home mortgage. Many service members find themselves frequently moving, which can affect their ability to save for a down payment and keep up with their credit history, neither of which are factored into getting qualified for a VA loan. Unlike getting a traditional mortgage, the VA mortgage program provides its borrowers piece of mind and flexibility in a number of categories.
Does the VA mortgage program offer competitive interest rates?
Since this program is guaranteed, or insured, by the Department for Veterans Affairs, lenders assume less risk in the case of a default. Interest rates increase when the lender has to assume risk. Because of this, lenders who offer the VA loan program offer lower interest rates than traditional lenders, because their risk is significantly lower. Usually, you can expect to have an interest rate of 0.5% to 1% less than that of traditional home loans.
What are the down payment requirements?
There is no down payment required for the VA mortgage program. This is a huge benefit for many members of the military, who often find it hard to save money while always on the move. Service members who qualify, can have 100% of their home financed.
Here’s an example of the money you can potentially save with no down payment required.
|Loan Amount||0% Down||5% Down||10% Down||20% Down|
Is there a penalty if a borrower pays off their loan early?
If you are able to pay off your VA home mortgage before your term is over, there are absolutely no prepay penalties. Most traditional lenders do not want borrowers to pay of their loans early, which would cause the bank to lose out on future interest payments. To ensure borrowers cannot pay their mortgage off early, they impose prepay penalties for doing just that. The money a qualified service member or veteran can save by avoiding the prepay penalty is a huge incentive and can enable borrowers to purse refinancing and purchasing a new home in the future.
Are VA loan borrowers required to purchase private mortgage insurance?
What is private mortgage insurance (PMI)? It is a kind insurance most lenders make you buy if you cannot put at least 20% down on the purchase price of the house. Saving up 20% of a house’s purchase price can be a daunting task for many veterans and since the VA home loan program is guaranteed by the federal government, the lenders are protected against default. In turn, they require no PMI. This can save a borrower hundreds of dollars a month and thousands of dollars over this live of the loan.
Here’s an example of what a VA mortgage borrower can potentially save without PMI
|Loan Amount||Monthly Savings||25 Year Term|
Can a service member use their Basic Allowance for Housing (BAH) as effective income?
If you are a current service member, you can use your BAH to pay your mortgage payments. This is a great benefit for active service members. To find out more information about BAH, visit our Basic Allowance for Housing page.
With so many advantages to choosing a VA home loan, thousands of veterans and active service members have successful been able to buy and afford a permanent residence.