Summertime is prime real estate time. Many military families are moving to new duty stations located in communities where it may make more sense to buy instead of rent a house. Other military families are separating from service and they are looking to buy their forever home this summer.
Are you thinking of buying a house? What’s your financing plan for your mortgage? Does your service member want to use his or her VA loan? Do you qualify for a VA loan?
The VA loan is a benefit for military service members that you might not know a lot about. Unlike the commissary or Tricare, which you use reguarly, a VA loan is a one-time or maybe twice in a lifetime benefit.
With a VA loan, veterans may qualify for a mortgage loan guaranteed by the Department of Veterans Affairs. The loans aren’t issued by the VA, but instead the agency provides a guaranty on each qualified mortgage loan. Since the loan is guaranteed by the Department of Veterans Affairs, financial institutions do not require homeowners to buy Private Mortgage Insurance (a monthly fee when you don’t make a 20 percent down payment), as required with conventional loans.
With a VA loan, homeowners are not required to make a large down payment. Since most conventional loans required a 10 to 20 percent down payment, a zero down payment is a huge advantage for young military families. You might not have the cash for a down payment today, but you can start building equity with a VA loan.
Here are four additional things you need to know about buying a home using a VA loan.
- You must use a lending institution that participates in the VA loan program. There are also a lot of extra forms involved with a VA loan, so be prepared for that. VA loans aren’t quick loans. They are money-saving loans.
- VA loans aren’t a one-time deal. Veterans are entitled to use the program repeatedly as long as they pay off the loan each time. So you can buy a house when you are young service member and then use your VA loan a second time for your retirement home.
- You can’t use a VA loan to buy a farm, restaurant or a vacation home. The program is designed to be used for primary residences only.
- VA loans do save you money, but there’s also a mandatory fee. This fee is called the VA Funding Fee. It’s normally 2 percent of the loan amount and it is required for both purchase and refinance loans.
- But in good news, VA loans don’t have a prepayment penalty. When you earn extra cash through a deployment or get an reenlistment bonus, you can put that money toward your mortgage. This can save you a lot on interest over the life of your loan.
Since 1944, the VA Loan program has helped more than 20 million veterans and their families buy a house. It’s a benefit that veterans have earned through their service. Make sure you take advantage of it.