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Mortgage lenders work hard to find the right loan for each client. Hands down, a VA mortgage is usually the best option for a qualifying veteran or active duty military borrower. The combination of benefits that are unique to this type of loan makes it very attractive for new home buyers.
The feature of VA mortgages that gets the most attention is the no down payment option. Qualifying borrowers are allowed to get a loan that is equal to 100% of the home’s asking price. Compared to other loans that require between 3% to 20% as a down payment, this can save the veteran thousands of dollars. Plus, saving for a down payment can take time and feel like a daunting task.
Compare Rates Among Lenders
Since the Veterans Administration does not actually lend out the money for the mortgages, borrowers are free to compare rates between banks, mortgage brokers and even credit unions. This makes it possible for veterans to deal with a lender of their liking without being forced to go to only one financial outlet.
Private Mortgage Insurance is Not Required
Most mortgages that allow borrowers to pay less than 20% as a down payment will require the homebuyer to also pay private mortgage insurance. This is a premium paid to protect against the risk of foreclosure.
Conversely, even though the VA will allow borrowers to purchase without a down payment, they also do not require private mortgage insurance. This is one more way that a VA loan is cheaper compared to other mortgages.
Various Ways to Use a VA Mortgage
A VA loan can have a rate that is fixed over the entire term of the loan, or it may have an adjustable rate.
The loan can be used to purchase a single-family home, a condo unit, a duplex or a brand new construction property.
The loan may be used to purchase a home. Or the loan may be used to refinance an existing VA loan.
How the loan is used is determined by the lender and the borrower’s needs.
Insured by the Government
The VA loan charges a fee at the beginning of the loan. This fee is placed into a holding account. The money in that account is earmarked to repay a lender at least a guaranteed portion of the loan in the event that the borrower is no longer able to make the payments.
Relaxed Qualifying Guidelines
The VA loan will require borrowers to prove their monthly income with appropriate documents such as pay stubs, W-2 forms, tax returns or other types of supporting paper. The lender will also review the borrower’s credit file to make sure the veteran will qualify for the loan. However, the overall rules for approving a person for a VA mortgage are a bit more lenient when compared to most other mortgages.
No Prepayment Penalty
Some loans charge a penalty if the loan is paid off early. This is to make sure the lender makes its designated profit off the loan. However, the VA Administration does not charge such a penalty. This makes it easier to sell the home and move in case the borrower’s situation changes.
VA Loan Can be Assumed by New Borrower
If a VA borrower owns a home and wants to sell, the new borrower does not have to get a new mortgage loan. The VA mortgage guidelines will allow the next owner of the home to assume the old mortgage and continue making the same payments, with the same interest rate, and the remaining term of the loan. This would have to be agreed on between the seller and the buyer, and the new borrower would have to meet the same qualifying guidelines as if that person were buying the home new.
Cheaper Closing Fees
When it comes to closing fees for a VA mortgage, lenders are limited with the amount that can be charged to veterans. This is one more way that qualifying applicants can save money when they choose a VA loan.
Final Thoughts On Why Your Veteran Home Buyer Should Get A VA mortgage
Between relaxed lending rules, lower overall costs and no requirement for a down payment, it is easy to see why qualifying veterans and active military people prefer the VA mortgage for their home buying needs.
Additional VA Mortgage Resources:
VA Mortgage Facts via RealtyTimes
Benefits Of The VA Mortgage by Bill Gassett
VA Second-Tier Entitlement Information
Minimum Property Requirements for VA Loans
About the author: This article on the “Why Your Veteran Home Buyer Should Get A VA Mortgage” was written by Luke Skar of www.MadisonMortgageGuys.com. As the Social Media Strategist, his role is to provide original content for all of his social media profiles as well as generating new leads from his website.
MadisonMortgageGuys.com and team provide award-winning customer service to clients who need to purchase a home or refinance an existing mortgage. Our branch currently serves Wisconsin, Illinois, Minnesota, and Florida.
Great post, Luke. I’ve helped many vets into homeownership through VA loans. It is a great product. Especially for those with limited funds for a downpayment.
Thanks Gabe! I couldn’t agree more, the VA mortgage is a great program.