14 Jan Things You Should Know Before Purchasing Your First Home With A VA Home Loan
VA home loan indeed lends massive support to veterans and active duty service members looking to purchase a home. Since 1944, the Department of Veterans Affairs has backed over 20 million VA loans.
However, not every service member gets approved for the loan by lenders. The reason is that not everyone is thoroughly aware of how VA home loans work.
When applying for a VA home loan, you must keep the following facts in mind –
The Department of Veterans Affairs doesn’t provide the loan. It backs the loan.
A huge misconception related to VA home loans is that the Department of Veterans Affairs provides the loan. However, it’s not true. VA guarantees the loan provided by private lenders.
In simple words, the VA assures the lender that a part of the loan will be covered if the borrower makes a default. So, the lender knows that they will at least recover the guaranteed amount irrespective of the default.
Not all properties can be purchased using a VA home loan.
VA home loans cannot be used to purchase vacant land unless it also has a construction loan. Similarly, it’s up to the lenders if they sanction a home loan to buy modular or manufactured homes.
You must buy a primary residence with your VA loan benefits.
Lenders will not sanction your VA home loan to buy a vacation home or an investment property. The property must fulfill the residency requirements set by the VA to qualify for the loan.
VA home loan doesn’t include pre-payment penalties.
You won’t be penalized for closing your VA home loan early. So, you can increase your monthly payments and pay off the mortgage in less time. Paying off your VA home loan before the loan’s closing date can save you thousands of dollars in interest.
You may have to pay a funding fee for your VA home loan.
You may be asked to pay a funding fee to get your VA home loan. This fee is the cost of processing your VA loan, ensuring you get the loan at zero down payment and without monthly mortgage insurance.
However, in some cases, the funding fee could be waived off or added to the total loan amount.
You don’t need to pay for monthly mortgage insurance.
As a VA home loan is guaranteed by the VA, it doesn’t require monthly mortgage insurance. Otherwise, you need to have monthly mortgage insurance in a conventional loan if you don’t make at least 20 percent down on a new mortgage.
You can use your VA loan benefit multiple times.
You can use your VA home loan benefit as many times as you want until you don’t have an existing VA loan.
Qualifying for a VA home loan can be tricky. We recommend you reach out to a VA loan agent before applying for a VA home loan.