Why A VA Loan?

Why A VA Loan?

What Does A VA Home Loan Offer To You?

Providing for a family is one of the prime concerns for every active and retired member of the U.S. military. The Veteran’s Administration offers a variety of services that are designed to help military personnel to take advantage of the way of life that they are fighting for. One of the more helpful programs being offered is the VA Home Loan program. For veterans who are working hard to make ends meet, this program is ideal in making sure that you get the home that you want and need.

The VA Home Loan program is backed by the Veteran’s Administration and offered through certified lenders throughout the country. Active and retired military personnel can contact their local Veteran’s Administration office to find out which lenders in the area offer the program. When you start discussing the program with a lender associate, you will start to see why the VA Home Loan program is so popular among veterans.

The cost of ownership of a home starts with the closing of the mortgage. In a standard mortgage, a down payment is normally required. That down payment can run anywhere from 10 to 20 percent. In most cases, mortgages that are secured with less than a 20 percent down payment have mortgage insurance added to their monthly payments. All of this adds to the financial strain on the buyer and the overall cost of ownership.

To put this into real numbers, let us look at a standard mortgage of $100,000. A down payment of 10 percent is $10,000, which is money that the borrower will have to come up with on his own and show proof of where the money came from. Because that down payment is less than 20 percent, the lender will add mortgage insurance of 3.5 percent ($3,500) to the cost of the mortgage, which raises the monthly payments. To avoid all of this, the borrower can come up with a down payment of 20 percent, which means an additional $20,000 out of the borrower’s pocket at closing.

The VA Home Loan program does not require a down payment, and the maximum mortgage amount offered can be as much as $417,000 for qualified borrowers. There is also no mortgage insurance, which lowers the cost of ownership for the veteran. For a home loan of $250,000, not having to pay mortgage insurance means a savings of approximately $191 per month on your mortgage payment.

The Veteran’s Administration does not issue these loans, but it works with the lender to guaranty the loan and offer financial security to the lender. This is a great help to veterans because that guaranty gives the lenders the confidence they need to offer extremely competitive interest rates. The interest on a mortgage can sometimes double the cost of a mortgage to the borrower. A change in interest rate of just one percent can mean thousands of dollars added or subtracted to the overall cost of the mortgage.

Because the Veteran’s Administration guarantees the VA Home Loan program, the lenders involved are able to offer extremely competitive rates and keep the cost of ownership down for veterans. These are interest rates that are on par with standard mortgages and the very best FHA mortgage programs.

As an active military member, there are some complications with your compensation that could make getting a standard mortgage very difficult. For example, active military personnel are given what is called a Basic Allowance for Housing, or BAH. Most standard lenders do not consider that as part of a military person’s income, but the VA Home Loan program does. The Veteran’s Administration understands how valuable a BAH is to a military member and allows that BAH to count towards loan approval.

The Veteran’s Administration also puts in several helpful features in the VA Home Loans that make them attractive to veterans. For example, there are no pre-payment penalties associated with VA Home Loans. That means that a veteran can pay his mortgage off early and not incur any financial penalties. VA Home Loans are also assumable by non-military buyers. If a veteran wants to unload his property to a non-military buyer who is willing to assume the mortgage, then the VA Home Loan program allows that to take place.

Veterans will also find that refinancing a VA Home Loan is a streamlined and simple process as well. There are many practical reasons for considering a VA Home Loan, especially if you want to take advantage of the military benefits that you have spent years earning.