Benefits of VA Home Loans
Millions of veterans and service members are eligible for a VA home loan. When searching for a mortgage, veterans should consider the major benefits and perks of using a VA home loan.
Complete List of VA Loan Benefits
- Eligible homebuyers are not required to have a down payment in most cases – typically cited as the greatest VA loan benefit. Conventional loans generally require a 5 percent down payment, and FHA loans require 3.5 percent.
- No monthly mortgage insurance premiums or PMI to pay. FHA loans come with both an upfront and an annual mortgage insurance charge. Conventional buyers typically need to pay for private mortgage insurance unless they’re making a down payment of 20 percent or more.
- Limitation on buyer’s closing costs. Sellers can pay all of a buyer’s loan-related closing costs and up to 4 percent in concessions.
- Lower average interest rates than other loan types. VA loans continue to have the lowest average interest rates of all loan types.
- No prepayment penalties. VA buyers can pay off a loan early without any financial penalties.
- Two refinance options. The VA loan program allows homeowners with existing VA loans the option to lower their monthly payment with a new interest rate. Eligible homeowners who financed their property with a loan other than a VA loan can refinance into the VA loan program.
- Second tier entitlement. Even though many veterans have already used their loan benefits, it may be possible for them to buy homes again with VA financing using remaining or restored loan entitlement.
- An assumable mortgage, typically subject to VA and/or lender approval. You may be able to have someone take over your mortgage payment, which can be a big benefit in an environment of rising interest rates.
- Foreclosure avoidance advocacy from the VA loan program. The VA has staff members who advocate on behalf of homeowners to find alternatives to foreclosure.
What VA Loan Cannot Do
The VA does not guarantee that the house you buy, whether it is new or previously occupied, will be free of defects.
The VA appraisal is not intended to be an “inspection” of the property. If you have any doubts about the condition of the house, it is in your best interest to have a home inspection performed prior to purchasing the home.
Most sellers will permit you, at your expense, to arrange for an inspection by a qualified residential inspection service and negotiate with you concerning repairs to be included in the purchase agreement. Such action can prevent later problems, disagreements and disappointments. Remember, VA guarantees only the loan, not the condition of the property. It is your responsibility to be an informed buyer and assure yourself that what you are buying is satisfactory to you in all respects.
The purpose of the VA home loan program is to help those who served finance affordable housing. Despite its Minimum Property Requirements, the VA cannot, however, guarantee that you are making a good investment, or that you can resell the house at the price you paid. The VA does not have authority to provide you with legal services.
SOURCE: VA HOME LOANS