What are the benefits of a VA Home Loan?
VA Home Loans are a Veteran benefit that every Veteran should know about and how to use. You can easily qualify for a VA Home Loan by getting a Certificate of Eligibility from the VA.gov website and finding a VA-approved lender. In most cases, your lender will even help you acquire your Certificate of Eligibility at the same time you get pre-approved for a loan.
But, you might be wondering, “What are the benefits of a VA Home Loan?”
Well, there are quite a few benefits to this type of loan.
Benefits of VA Home Loans
The number 1 benefit to VA Home Loans, which makes them most appealing, is having a 0% down payment. With no down payment, this means that if you choose to use a VA Home Loan to purchase your new residence, you will not be required to put any money down on the home upfront. The VA Home Loan is an excellent benefit for planning a military to civilian transition and doesn’t have the funds saved up to put a sizeable down payment for a house.
Traditionally when buying a home, the bank requires that you pay 20% of the purchase price as a downpayment. If you cannot do that, they will charge you an extra monthly fee called Private Mortgage Insurance, which ensures a large percentage of the bank’s money if you default on your loan. These additional payments can make an affordable mortgage payment very costly and often do not make sense for the purchaser.
So in most cases, using a VA Loan saves you from paying additional fees on top of your monthly mortgage payment!
Another benefit of the VA Home Loan is your ability to negotiate closing costs and include some of them into the total sum of the loan. While this benefit saves you money upfront, it does mean that your mortgage payments will increase slightly. Ensure that you verify with your lender what that new payment will be and that it makes sense for your budget.
One of the closing costs to be aware of is the VA Funding Fee, a one-time fee the VA charges you to insure the lender 25% of the loan amount if you default. Having a VA disability rating of 10% or more means you can waive this fee entirely. For help with disability benefits and more, take our VA Benefits Survey and connect with our team.
Most Veterans who use VA Home Loans also typically see lower interest rates than standard home loans, which means that you will pay less interest over the life of your loan.
VA Home Loans also offer foreclosure avoidance so if you aren’t able to make the payments on your loan, you will be able to work with your lender to work out a payment plan so that you can avoid having to foreclose on your home.
Another incredible benefit is the Veteran’s ability to buy a multi-family home of 2-4 units, allowing you to live in one unit. In contrast, the other units pay off your mortgage. The savvy Veteran can leverage this benefit to supplement a military retirement. For more information on how you can do this, listen to our discussion on leveraging your VA Loan.
Despite all of these great benefits, there are a few limitations to the VA Home Loan you should be aware of.
Before you apply for the loan, starters must plan to occupy the residence, which means you must intend to live in the house you are purchasing.
While the requirements for the loan are somewhat flexible, the lender you must qualify through might be a little more stringent. You might have to meet financial conditions, which could include two years of financial proof, credit score requirements, debt to income ratio, and more.
And it would help if you kept in mind that you are only eligible for a 0% down payment on the total amount approved for your purchase. For example, if you are looking in an area with high housing costs, your approved amount might not cover the full cost of the home. In this instance, you would pay 25% of the difference in a down payment.
You may use the VA Loan benefit more than once. However, you are limited to having two active VA Loans out at the same time. Before you use it for a third property, you must either sell the property or refinance the loan on one of the previous two.
Despite these few limitations, the VA Home Loan is the number one benefit for any Veteran looking to purchase a new home.
Have a question about your Veteran benefits? You can email us today! If you are within one-year pre to post-military separation, you can enroll in our FREE program by setting up a call with one of our transition coaches.