Why a VA Loan is Right For You
As a veteran, there is no better option for financing a home purchase than with a VA loan. The VA loan is also available for active duty servicemembers and military families as well. Thanks to government backing, these specialized loans are highly flexible and offer many advantages over traditional loans, especially for veterans and servicemembers who have had issues getting the financing they need.
Advantages and Benefits
Your VA loan will not generally require a down payment, and since the federal government backs the loan, you will not need to purchase PMI. The VA loan offers highly competitive rates and qualified borrowers will be able to make a home purchase with little or no out of pocket expense.
Much of what has made the VA loan such a popular option for service members are the long list of advantages and benefits, these include:
No Money Down
Due to the nature of military service, it can be difficult to remain stationary enough to build credit. Thanks to the VA Loan, many service members can qualify for the entirety of the home’s value in financing while maintaining a no money down policy. Take a moment to look at some of the savings that can result from purchasing your home through a VA Loan with no down payment.
|Loan Amount||0% Down||5% Down||10% Down||20% Down|
No Private Mortgage Insurance (PMI)
Traditional loans typically require that the buyer pay for private mortgage insurance if they are unable to put down 20% of the home’s value up front. For veterans, this can be difficult, if not impossible, to do. PMI is intended to protect the lender in the event that the buyer defaults on the mortgage.
There is no need to worry about PMI with a VA Loan; all VA Loans are federally backed, negating the risk for the lender. If the buyer channels the money they save by not needing PMI, it will allow the buyer to quickly build equity and save thousands of dollars over the course of the loan. Let’s look at the monthly savings that you can receive by not needing to purchase PMI:
$150,000 Save $115/mo
$250,000 Save $191/mo
$350,000 Save $268/mo
$450,000 Save $345/mo
Great Interest Rates
The interest rate paid on a home loan is generally determined by the amount of risk the lender must undertake in order to provide financing to the borrower. Each VA Loan is backed and guaranteed by the federal government so it does not present the lending risk that traditional loans suffer. This makes it easier for financial institutions to lend without worry. Typical interest rates for VA Loans are .5%-1% lower than traditional rates.
Combine the ability to purchase a home with no money down, along with the low interest rate, and veterans will see substantial savings throughout the life of the mortgage.
Basic Allowance For Housing (BAH)
Another benefit for qualified service members is the ability to use your BAH as effective income. This means that you can use BAH to pay some, or possibly even all of your mortgage payment. Of course, the amount of your BAH depends on your pay grade, geographic location, and the number of dependents within your household.
No PrePayment Penalties
In some cases, paying the entirety of the loan off before maturation is met with a fine. These “prepayment penalties” or “early payoff penalties” are enacted because the lender loses the money they would have collected as interest.
A VA Loan, on the other hand, will typically allow you to make larger or additional payments without any penalties for doing so. With no prepayment penalties, veterans can look forward to future home purchases and refinance.
Start your VA loan process today by calling one of our loan specialists at 1-888-220-2921.