By Marguerite Cleveland
One of the benefits of military service is eligibility for a VA Guaranteed Loan to purchase a home as a primary residence. This great program allows you to save money and avoid tying up your savings by having no down payment requirement. Here are some of the many benefits:
- No Down Payment. The biggest advantage of a VA loan is you can save your cash by not having to put down a large down payment. According to Realtor.com’s Housing Trend Report in March the average home listing price in the US was $300,000. So with a 10% down payment you are looking at $30,000 and with a 20% down payment $60,000. Add that to closing costs and it can put a house out of reach for many people.
- A VA Appraisal. While this doesn’t take the place of a thorough home inspection. There are minimum property requirements set by the VA which ensure your property is safe, sanitary and sound.
- No mortgage insurance. Basically when you purchase a home on a conventional mortgage with less than 20% down you have to pay PMI (mortgage insurance) until your mortgage is paid down to 78% of the value of your initial purchase price. On a $300,000 loan you are looking at around $100 more a month added on to your mortgage payment.
- Funding Fee. This varies according to your status but for an initial purchase for an active duty military service member it is 2.15% with no down payment. This fee can be rolled into your loan and is much less than the typical down payment. In addition if you are a disabled Veteran rated as low as 10% disabled you are eligible for the funding fee to be waived for a nice savings in costs.
- Closing Costs. The VA limits what lenders can charge for closing costs. It saves on all those added on fees many lenders will charge. This can save you a nice chunk of change.
- Less Restrictions. There are no prepayment penalties and no restrictions on refinancing your VA loan. In fact the VA even has a program called the Interest Rate Reduction Loan program.
- Easier to Qualify. Because of the VA Loan Guaranty, VA loan guidelines are more flexible. You will still have to submit documentation but the process has less requirements.
- Ability to Shop for the Right Loan. VA Loans come in all shapes and sizes. They can be fixed or adjustable rates and used to purchase a variety of housing options such as a house or condo. Each lender sets their rates so you can shop around to get the best fit for your situation. I have found that credit unions like Navy Federal Credit Union consistently have the best rates and terms as well as not selling your loan to another mortgage company.
VA Loans have many great benefits but be aware that in a hot real estate market many sellers will state they won’t accept a VA Loan. There is a perception among some real estate agents that the loan takes longer to process than a conventional mortgage and that the VA appraisal process is too stringent. We recently purchased our forever home in a hot market with a VA mortgage. We lost a few because we were using a VA loan but ultimately found our home. We just weren’t willing to forgo this benefit. For more information visit: www.VA.gov
Marguerite Cleveland is a freelance writer who specializes in human interest and travel stories. She is a military brat, a veteran and now a military spouse. Her military experience is vast as the daughter of a Navy man who served as an enlisted sailor and then Naval Officer. She served as an enlisted soldier in the reserves and on active duty, then as an Army Officer. She currently serves as a military spouse. She lives in the Pacific Northwest with her husband and two sons. Visit her website www.WanderWordsWine.com