The Veterans Affairs or VA loan program is one of the best financing programs available on the market for veterans, active-duty, and military families. It is backed by the U.S. Department of Veterans Affairs, and is a flexible option that offers tremendous benefits for veterans and active military who may otherwise find difficulty with obtaining financing for home-ownership.
While the Department of Veterans Affairs does not offer money for VA loans, they support loans from lenders, such as banks and mortgage brokers. Apply Online
Three types of VA loans are available – purchase loans, interest rate reduction refinance loans (or IRRRL), and cash-out refinance loans.
Who is eligible for a VA loan?
The loan program is available for the following:
- Active-duty personnel
- Members of the National Guard
- Reserve members
- Some surviving spouses
In order to qualify, veterans, active-duty, and military spouses must have sufficient income, good-standing credit, and a valid Certificate of Eligibility. They are also required to use the home for their own personal occupancy.
Benefits of VA loans
Here are some of the signature benefits you can get with the VA loan program:
- No down payment. One of the biggest benefits of getting a VA loan is that it does not require any down payment. This is very convenient as many service members are constantly on the move, making it difficult for them to save money and build credit. VA loans allow qualified borrowers to finance 100% of home’s value without spending anything.
- No private mortgage insurance. Most conventional lenders require a private monthly mortgage insurance from borrowers, unless they are able to pay 20%. This can prove to be a difficult task for many veterans. Lenders need private mortgage insurance or PMI to protect themselves in case of a borrower default. Because the federal government backs VA loans, there is no need for a PMI, as they can assume the risk on behalf of the borrower. With a VA loan, homeowners can build more equity on their homes, allowing them to save thousands of dollars over the course of their mortgage.
- Competitive interest rates. The interest rates on home loans are based on risks anticipated by the bank in order to finance the loan. VA loans are backed by the VA and come with a guarantee, so financial institutions assume less risk, allowing them to offer interest rates that are about 0.5 to 1% lower than standard interest rates. Combine these lower interest rates with the other benefits like no required down payment and no private mortgage insurance and you get a significant amount of savings over time.
- No pre-payment penalty. In most types of loans, homeowners can incur a pre-payment penalty when they pay off a home loan before it matures. The reason for this is that lenders are denied additional opportunities to collect payments. Borrowers with VA loans are able to pay off their home loans during any point without worrying about pre-payment penalties. Without the limits created by pre-payment penalties, VA loan borrowers are able to consider additional home purchases and refinancing options.