You are a veteran (or other qualified participant) and you are wondering if a VA loan is the right way to go. Simply put, for veterans who meet the eligibility requirements of the Veterans Home Loan Program, it will in most cases be your best option. Yes, there are certain restrictions and rules of compliance?such as occupancy requirements. You will need to apply and go through the eligibility process before you can even seek a loan, but the positives almost always trump any negatives.
I?m giving you a quick list of reasons why a VA loan may be your best option:
- No mortgage insurance premiums ? a real benefit in the current housing market.
- Homes are inspected and appraised by VA prior to approval and/or during construction.
- VA can offer assistance to veteran borrowers in default due to temporary financial difficulty.
- There is no down payment required (though you can make one).
- You can finance the VA funding fee in the loan.
- VA Loans do not require perfect credit ? there is no credit score cut-off.
- Flexible mortgage types ? fixed, hybrid and traditional ARMs.
- VA guaranteed mortgages are assumable.
- No pre-payment penalties on a VA loan.
- Refinance and interest rate reduction loans are available.
- VA funding fees may be waived for veterans with service-connected disabilities and surviving spouses of veterans with service-connected disabilities.
- Closing costs may be shared between the buyer and lender.
If things have been tight financially lately; or, if you have gone through a bad spell somewhere along the way, there is something else to consider about the VA mortgage loan program. Lenders working with VA home mortgage loans tend to allow lower credit scores ? in the 620 range or higher. To help defray the costs of a veterans mortgage loan, there is a funding fee for your VA loan. The funding fee varies based on being active duty or part of the Reserves/National Guard. Veterans loans have limit amounts ranging from $417,000 to more than $1 million, depending on the county in which you live.
Your VA Loan Means a Lower Monthly House Payment
The real benefit of having your VA mortgage loan backed by the government is that banks do not require private mortgage insurance (PMI) which will substantially lower your monthly house payment. VA loan rates are typically 0.5%-1% lower than conventional loans.
I have provided you with a table so you can see just how much savings are available with a VA mortgage loan with its lower VA home loan rates and no PMI:
| Estimated Monthly Savings for a New VA Loan | |||
| Loan Amount | 1% Rate Reduction | PMI Savings | Total Mo. Savings |
| $150,000 | $94 | $115 | $209 |
| $250,000 | $156 | $191 | $347 |
| $350,000 | $220 | $268 | $488 |
| $450,000 | $282 | $345 | $627 |
You may have heard someone suggest that some sellers avoid VA loans because of the added loan processing requirements and inspections. What they fail to understand is the ?why? part of the matter. The added requirements for a VA loan are really quite minimal and exist to protect the veteran?s investment to make sure he or she gets the best possible value. When the housing market was wide-open and free-wheeling, there were a lot more people looking to buy homes than there were homes available to buy. That is just not the case in the current housing market.
The current housing market finds far more homes than there are qualified buyers, so most sellers are more than happy to deal with the rigors of a VA loan. In other words, the timing for a veterans mortgage loan is right.
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