VA home loans are making a huge difference for a new generation of military home buyers. During a time of tight mortgage lending, these government-backed loans are absolutely booming. The reason for the resurgence: VA loans provide some key home buying benefits that, when taken in total, other financing options can’t match. Here’s a look at the four biggest benefits of VA mortgages.
No Down Payment
This is the program’s defining benefit. Qualified buyers can purchase up to $417,000 in most parts of the country before having to factor in a down payment. Borrowers in costlier areas can go even higher.
Veterans and active military members can spend years trying to save the minimum down payment for FHA (3.5%) or conventional financing (5%). On a $250,000 loan, that’s nearly $9,000 or $13,000, respectively.
Nearly nine in 10 VA buyers purchased with $0 down last year alone.
No Mortgage Insurance
FHA and conventional buyers who can’t muster a 20% down payment are usually saddled with the added expense of mortgage insurance.
FHA loans feature both an upfront and an annual mortgage insurance premium that can easily add a couple hundred dollars to your monthly payment. Private mortgage insurance for conventional loans is a monthly charge based on your loan amount, your credit score and other factors.
Either path means paying more each month.
VA loans don’t carry any kind of mortgage insurance. There is an upfront fee that most borrowers choose to finance. Veterans with a service-connected disability don’t have to pay it at all.
Flexible & Forgiving Requirements
This is a program focused on helping get veterans into homes. Given that, VA loans tend to feature more flexible and forgiving requirements than other loan types.
That covers everything from the kind of credit score most VA lenders are looking for to how soon a veteran can purchase after experiencing a bankruptcy, foreclosure or short sale.
VA borrowers can secure financing without a down payment and a credit score more than 100 points lower than what’s common for their conventional counterparts. Requirements and restrictions will vary by lender.
Closing Cost Limits
No matter the mortgage type, you can’t escape costs and fees. But the VA actually limits what borrowers can pay in closing costs. In fact, there are some expenses homebuyers aren’t allowed to pay.
Sellers can pay all of a buyer’s loan-related closing costs and up to 4% of the loan amount in concessions, which can cover things like prepaid taxes and insurance and even paying off a buyer’s collections or judgments at closing.
Want to learn more? Check out - Veterans Guide to Homeownership and get started on your home-buying journey.
This article was written by Chris Birk, Director of Education at Veterans United Home Loans and author of “The Book on VA Loans: An Essential Guide to Maximizing Your Home Loan Benefits.”