There are mortgage loan options specifically available to veterans of the armed services and their spouses called VA loans. These loans often have better interest rates and may not require as much of a down payment, but they do have very specific requirements for who is eligible and how you can qualify. Here is a quick overview of VA loans and how to know if they would be a good option for you.
VA Mortgage Benefits
VA mortgage loans come with several benefits, especially if it’s your first home or you don’t have a lot of cash available for a down payment. Benefits include:
- No down payment required
- No private mortgage insurance (PMI), even if you put less than 20 percent down
- Government guarantees, making them a safe option for lenders
- Competitive interest rates, often lower than even conventional mortgage rates
- No prepayment penalties if you want to sell your home or pay off your loan before the loan term is over
- Eligible for both fixed and adjustable rate mortgages
- Flexible guidelines that make it easier even for new borrowers to get a loan
- Lower total out-of-pocket costs for the loan
There is a funding fee required for a VA loan that ranges from 1.4% to 3.6% of the loan amount, but you can pay it in cash, or you can finance it and pay it over time.
Another great benefits of VA loans is that they are assumable, which means that someone else who qualifies for a VA loan could take over the loan payments (after getting approved by the lender) instead of starting from scratch with their own mortgage loan. They still must meet the eligibility criteria for a VA mortgage, and any criteria from the lender, but this can save someone a lot of money and be a significant selling point when it’s time to sell your home.
This can save someone a lot of money, especially when interest rates are on the rise. Since interest rates are at or near all-time lows right now, that could be really great for a future buyer if rates do go up. Your future buyer who qualifies for the VA loan will get the same monthly payment and interest rate as you have today and will benefit from any money that you have paid toward the principal.
In part two of this blog post we’ll cover some of the eligibility requirements and what kind of paperwork is necessary to qualify. In the meantime, talk to our experts at Integrity First Lending about whether a VA loan is a good option for you.