VA loan Benefits in 2019
With mortgage rates down to a near-historic low, it’s no surprise that many people have gained an interest in buying a home or refinancing their mortgage. Now is a great time for first time home buyers to make their move, since obtaining a mortgage for the first time is a huge financial step and is often the largest investment that the average person will make in their lifetime. For homeowners who are looking to move to another home or pounce on the current market rates for a refinance, there may be no better time than the present.
Of course, one of the major reasons for home buyers and homeowners alike to be hesitant about getting a home loan or refinance is knowing how to choose the right mortgage product. The problem isn’t with scarcity either. In fact, there are so many amazing mortgage loan options, that it can be a little difficult to confidently choose the best loan for any specific financial situation.
In terms of popularity, conventional loans have long been the go-to for financing a home purchase. Even so, mortgages insured by the Federal Housing Administration (FHA loans) have also been a largely sought after loan option. FHA mortgages are highly competitive loan products with some stellar benefits.
Even USDA loans are a highly competitive mortgage option for eligible home buyers these days. Many mortgage programs in modern times now cater to home buyers with less than perfect credit or have lower down payment requirements or even significantly lower interest rates. Modern borrowers rely on these home loan benefits to lighten the burdens typically associated with obtaining and affording mortgage loans.
As it turns out, one of the best home loan options when it comes to benefits are mortgages insured by the United States Department of Veteran’s Affairs. “VA loans” as they are often called are exclusive to men and women who serve or who have previously served in the United States military, and their families. For those eligible for a VA mortgage, the loan presents one of the very few no-money-down mortgage opportunities that is actually more affordable over time than the average conventional loan.
Regardless of whether you’re looking for a home purchase or a refinance loan, there’s likely a lot of options that will suit your individual needs. For active or retired members of the US military, the VA loan program is probably the best place to start looking for just that. After all, VA home loans are nearly unmatched in the world of home finance.
Below, we’ll take a look at some of the benefits that come with a VA Loan.
Benefits of the VA Loan
Insured by the US Department of Veterans Affairs, VA loans are designed to promote homeownership among active duty personnel, veterans, and their families. VA loans have near unmatched affordability and can be utilized for many purposes within the realm of home finance. Some of their amazing benefits for home buyers and homeowners include:
VA Loans have Zero Down Payment Requirements
Probably the absolute best possible thing about a VA loan is the lack of a down payment requirement. Many home buyers fear having to make a down payment, as the industry standard of 20% typically requires a ton of cash that most people simply don’t have laying around or saved up. That 20% can feel impossible even in the best of financial times, but luckily, with a VA home loan, a down payment becomes nothing more than an option.
VA mortgages offer a true “no money down” home loan, with a loan to value ratio (LTV) of 100%. What this means is that borrowers are allowed to finance up to 100% of the purchase price, rather than the standard 80% LTV offered by most conventional financing options. They even surpass FHA loans, which only require a down payment of at least 3.5%.
Many home buyers and homeowners alike can attest to the fact that the down payment is one of the most feared aspects of a mortgage transaction. With the VA loan program, there is no longer the need to worry about this large out of pocket expense. Instead, borrowers get to focus on the monthly repayment of their loan.
VA Loans Don’t Require Mortgage Insurance
Enjoying a home loan with a low or no down payment requirement is rare enough, but for the loans that do offer this well sought-after trait, there is usually a catch. Most loans that boast upfront affordability come with a requirement for the borrower to pay some form of mortgage insurance, whether in the form of private mortgage insurance for conventional loans or the FHA loan’s mandatory mortgage insurance premiums. Mortgage insurance is an additional sum that must be paid monthly and is typically required by lenders to help lower their risk of loaning money to a borrower.
Miraculously, even though VA loans carry the rare zero down payment benefit, they do not require the payment of any mortgage insurance. VA borrowers can rest easy knowing that their monthly payments will not suffer any inflation from their lack of making a down payment. The combination of zero down and no mortgage insurance to have to contend with already puts VA loans ahead of most other loan options when it comes to affordability.
VA Loans are Offered at Competitive Rates
Even with the government’s insurance on VA mortgages, the US Department of Veterans Affairs does not dictate what interest rates a lender is required to impose on a VA mortgage. This is invaluable, because it allows borrowers to shop around for VA approved lenders, and get multiple rates and loan terms to compare. While aggressively shopping around for better loan terms is highly recommended for all mortgage transactions, Getting the best possible terms on the already impressive VA loan can save a borrower thousands.
There is no Prepayment Penalty on VA Loans
VA loans allow homeowners to pay off their loans early or sell their property with no prepayment or early exit fees. Many loan products impose prepayment penalties on borrowers who pay off their home loans before the agreed payment date at the end of the loan term. Many lenders even charge these early exit fees when a borrower sells their home or even attempts to refinance their mortgage with a new lender.
VA loans have no restrictions on how quickly a borrower can sell their home, and no punishments for it either. Borrowers who can pay off their loan earlier than the payment date on the loan agreement can do so without incurring any additional fees.
VA Loans Have Flexible Refinance Options
Homeowners with VA mortgages have nothing to fear when it comes to refinancing. VA Loans can be refinanced to any other loan without penalty. Additionally, the VA’s Interest Rate Reduction Refinance Loan (IRRRL) program allows borrowers to refinance their existing VA loan to another VA mortgage with ease. The VA IRRRL is comparable to the FHA Streamline Refinance program.
VA loans Are Versatile
Did you know that VA loans can be packaged as either a fixed rate mortgage or an adjustable rate mortgage depending on the borrower’s preference? Better still, VA loans are not strictly for single unit home purchases. A VA mortgage can be utilized to finance home construction, renovate or rehabilitate an existing property, purchase a multi-unit property such as a duplex or triplex, make a property more energy efficient, or even to increase the accessibility of a home.
VA Loans have Relatively Low Closing Costs
Another point of concern for the average borrower has always been the closing costs. These upfront fees are typically due along with the down payment in a mortgage transaction and are out of pocket expenses that people dread having to come up with. Believe it or not, but VA borrowers benefit here as well.
The US Department of Veteran’s Affairs actually limits the closing costs that lenders are able to charge borrowers. Ideally, this helps mortgage transactions get closed faster, and provides extra savings to borrowers, who can utilize that extra money saved to pay for the cost of moving or to purchase furniture.
VA Loans are Assumable
Registering as a win for sellers and buyers alike, VA loans are assumable mortgages, providing the recipient is VA eligible. An assumable mortgage can be a steal for a home buyer if the rates on the property’s mortgage are lower than the current market interest rates. They are also beneficial to the seller, who can sell their home fairly quickly with those competitive interest rates.
VA loans Are Not Just For Veterans
Beyond just veterans, VA loans are extended to multiple other groups associated with the US military and its branches. Among those eligible for VA financing include active-duty service persons, members of the National Guard, Reservists, midshipmen at the U.S. Naval Academy, officers at the National Oceanic & Atmospheric Administration, surviving spouses of veterans, and cadets at the U.S. Military, Air Force or Coast Guard Academy. Typically there is a minimum term of service required as part of VA loan eligibility criteria. In addition, VA loans are also available for people who had a spouse who was killed in the line of duty and have not remarried.
The VA Provides Mortgage Protection
For homeowners with VA loans experiencing financial hardship, the US Department of Veterans Affairs has services in place to help prevent foreclosure. The VA’s home retention assistance enables the VA to step in when a VA loan borrower is having trouble making their monthly mortgage payments. It is not uncommon for them to work directly with the lender in order to work towards a common goal of preventing the borrower from going into foreclosure.
If you’d like to learn more about VA Loans and how to get one, contact the home.loans team for a risk-free consultation!