03 Oct VA Home Loans: Things You Didn’t Know
VA loans are the most powerful loan program for most military borrowers. With these flexible, no-downpayment mortgages, over 24 million service members have become homeowners since 1944.
There are a few steps to explaining how a VA loan works, but many potential borrowers and agents are unfamiliar with VA mortgages. You can prepare for your VA loan benefit by reviewing ten facts.
- Reusable. It is possible to use VA entitlements over and over once the loan is paid off. If you have lost or currently have a mortgage to foreclosure, you can still apply for a VA loan.
- They’re only available for certain homes, and the VA loan may not be suitable for you if you’re buying a farm, deli, or fixer-upper. The program is primarily designed for move-in-ready properties, such as single-family homes, condos, modular homes, and multiunit buildings.
- Primary residences are the only ones allowed. Don’t use your VA loan benefits if you want to buy an investment property or a vacation home in the Poconos. Although VA loans are for primary residences, you can use this benefit to buy a duplex or another multiunit property if you live in one of the units. The VA provides exceptions, but lenders may also have their occupancy requirements.
- VA doesn’t issue them. The VA does not give a VA loan; on qualified mortgage loans, the agency provides a guarantee.
- However, the government guarantees them. Veterans Affairs typically guarantees up to 25% of your loan amount if you have a VA entitlement. Lenders are confident that the guaranty will provide excellent terms and rates on VA loans to service members.
- Bankruptcies or foreclosures do not prevent them from being available. Service members with bankruptcy or foreclosure histories can secure a VA loan. You can still use your VA loan benefit if your home has been foreclosed.
- They are not eligible for mortgage insurance. When, Unlike conventional loans, VA loans do not require mortgage insurance. However, they need a VA Funding Fee. Don’t pay 20 percent with other programs; you must pay mortgage insurance. Because of the VA’s guarantee, borrowers are not required to pay monthly mortgage insurance premiums.
- It costs money to use them. Conventional loans require mortgage insurance, while VA loans do not. VA Funding Fees, however, are needed. Both purchase and refinance loans require this fee, which supports the VA’s program. In the case of service-connected disabilities, it can be rolled into the loan amount and waived completely.
- Borrowing is unlimited. Veterans are eligible for VA loans, which allow them to borrow up to the amount a lender is willing to lend them without needing to make a down payment. That’s a significant advantage. Conventional loans usually require down payments of at least five percent; however, larger loans often require down payments of 15 or 20 percent. In the case of a $400,000 house, a 20 percent down payment would be $80,000.
- Prepayment penalties aren’t charged. Over the life of your loan, you’ll save a boatload in interest by making extra payments whenever you want. Setting up your prices so that a different amount is automatically deducted monthly is possible. Adding just $100 a month can save you tens of thousands of dollars.