04 Jan VA Home Loans Might Be Your Best Mortgage Option. Here’s Why
Service members often find themselves moving from place to place, which has a negative affect on their ability to save up for a down payment or even just keep up with their credit history, the good news is that neither of these are factored into getting qualified for a VA loan. These are just a few of the benefits that come along with qualifying for a VA home mortgage. Unlike a traditional mortgage, the VA mortgage program provides its borrowers piece of mind and flexibility in a number of categories.
What about the interest rates?
Because this program is essentially a guarantee, or is insured, by the Department for Veterans Affairs, lenders take on a significantly lesser amount of risk in the case of a default. Interest rates only increase when the lender has to assume risk. So because of this, lenders who offer the VA loan program offer lower interest rates than traditional lenders, as their risk is significantly lower. You can typically expect to have an interest rate of 0.5% to 1% less than that of traditional home loans.
What about the down payment?
One of biggest benefits of this program for a large number of folks serving in the US Armed Forces, who struggle to save money when they are always on the move, is that there is no down payment required for the VA mortgage program! Service members who qualify, can get the entirety of their home financed.
What about early repayment penalties?
Most traditional lenders do not want borrowers to pay of their loans early, because that would cause the bank to lose out on future interest payments. And usually, to ensure borrowers don’t pay their mortgage off early, they impose prepay penalties. That is not the case here. If you are in the position to pay off your VA home mortgage before your term is over, there are won’t be any prepay penalties. The amount of money a qualified service member or veteran can save by avoiding the prepay penalty is a significant incentive and enables borrowers to pursue refinancing and purchasing a new home in the future.
What about the private mortgage insurance?
Private mortgage insurance commonly referred to as PMI is essentially an insurance that most lenders make you purchase in case you are not able put down at least 20% on the total purchase price of the house. Saving up 20% of the house’s purchase price can be an extensive struggle for many veterans and therefore, once again, because the VA home loan program is guaranteed by the federal government, the lenders are protected against losses in the case of a default. Which is why, they require no PMI. This results in savings of up to hundreds of dollars a month for the borrower and thousands of dollars over the total span of the loan.
What about my Basic Allowance for Housing (BAH)?
If you are an active service member, you can use your BAH to pay your mortgage payments. This is a great benefit for current service members.
Find out more information about BAH, visit our Basic Allowance for Housing page.
Thousands of veterans and active service members have successfully been able to buy and afford a permanent residence because of VA home loans. You could be one of them!