The VA Home Loan is an outstanding loan program available to eligible veterans and active-duty servicemembers. It is a program whereby the Department of Veterans Affairs (VA) provides a guaranty to lenders, provided the lenders follow the guidelines established by the VA, to encourage those lenders to provide home financing at better terms than the bank or mortgage company might otherwise be able to offer. The loan program offers several significant benefits.
No Money Down
Most VA loans do not require a down payment. There are situations in which you may have to put some money down, if you are purchasing a home above the maximum loan amount, to name one. However, the large majority of home purchases using the VA Home Loan are completed with $0 down payment.
Lower Interest Rates
The fixed rates available on the VA loan program are often among the lowest fixed rates you will see on any loan program, even when compared to loan programs requiring a significant down payment.
No Monthly Mortgage Insurance
There are few programs that do not charge monthly mortgage insurance (MI) in one form or another with less than a 20 percent down payment. The VA loan program charges a Funding Fee when the loan is originated at your closing, but they allow the funding fee to be financed into the loan. This can make your monthly payment a few dollars more a month than it would be without the funding fee, but it is nothing compared to typical MI payments that can be hundreds of dollars a month. This means your payment can buy more home instead of paying more fees.
Often, refinancing a mortgage can be just as cumbersome a process as it is when buying a home. The VA provides a streamlined refinance process, with certain restrictions, if the only goal of the refinance is to lower your interest rate and, therefore, your payment. The program generally cannot be used if you are trying to cash out some of your equity in the home, reduce your loan term, or other situations. But, if all you are doing is trying to lower your rate, it is an easier, less-costly option.
VA Loans Are Assumable
This is an often-overlooked benefit of the VA loan program but it can be a significant one under the right circumstances. VA loans are assumable, meaning you could sell your home and let that buyer take over your existing loan. Now, it is not quite as simple as that sounds. There are potential drawbacks and the potential for continued liability, so you will definitely want to educate yourself and get assistance; but if you have a nice, low interest rate on your VA loan and the current rates are considerably higher, that could become a significant selling point for your home.
These are just a few of the most notable benefits of the VA Home Loan, there are several others that make the loan program one of the best programs on the market. In fact, if you are putting less than 20 percent down, no other program can compete. If you are thinking of buying a home and want to learn more about the VA program, contact me at your convenience. I am an expert on the program and I would be honored to serve you.