Advantages of VA Home Loans
Buying or refinancing a home is a very important
decision. Almost as important as selecting the right home is making
sure you are selecting the right loan. There are distinct differences
between VA and Conventional loans as well as significant advantages for
buyers who qualify for a VA Loan.
Down Payment - VA Offers $0 Down
Conventional loans require a minimum down payment of
3% but in many cases, particularly in today's market banks are asking
for as much as 10-20% down. Down payments help to mitigate the bank's
risk should the loan go into default. Because a VA Loan is backed by
the federal government, banks do not require a down payment making a VA
Loan one of very few loan programs that can still offer 100% financing.
Monthly Payment - Save Big Every Month with VA
Because the loan is backed by the government, banks
do not require PMI (private mortgage insurance), an added monthly
expense required for conventional loans where the borrower finances
more than 80% of the home's value.
Lenders will also offer a slightly lower interest
rate to a VA borrower (typically 0.5%-1.0% reduction vs. conventional).
Interest rates are based on the banks capital risk should the loan go
into default, but because a VA Loan is backed by the government the
bank takes less risk and is able to offer a lower interest rate to you.
A lower rate combined and no PMI can substantially lower your monthly
payment, which means more cash in your pocket every month.
Qualification Standards - VA is More Lenient
The credit score and qualification standards for each
loan type are very different. Once again, because the loan is backed by
the government, banks assume less risk and have less stringent
qualification standards for VA Loans making them easier to obtain
especially in this market.
Live Almost for Free
If you are active duty you can live almost for free
because many times your allotted BAH can cover the mortgage payment. So
you live almost for free while enjoying the tax benefits of
homeownership.
