If you’re purchasing a home and you’re an active military service member, a veteran, or a surviving spouse, then you may qualify for a VA loan. These loans are provided by private lenders but are guaranteed by the Department of Veterans Affairs. This makes it easier for lenders to provide veteran homebuyers with better terms. Let’s take a closer look at the benefits of a VA loan.
No need for a down payment
Saving for a down payment can be the biggest obstacle to homeownership for many people. But if you qualify for a VA loan, then you can purchase a home without any money down. The entire purchase price of the home can be financed, which means you won’t need to save for years to afford a home.
Don’t pay PMI (private mortgage insurance)
With conventional loans, buyers are required to pay for PMI, or private mortgage insurance, if you don’t put down at least 20 percent on a home. However with VA loans, you aren’t required to make those monthly insurance payments. Therefore, saving thousands of dollars over the life of the loan.
Get a great interest rate
Another reason why VA loans are so advantageous is that borrowers can often get great interest rates. These lower rates can save you money every month on your mortgage bill. Most VA loans have rates that are at least 0.5 percent lower than conventional mortgage interest rates.
No need for perfect credit
Has your credit score suffered recently as a result of the pandemic? Those with low scores may think that homeownership is out of reach. And if you were applying for a conventional loan that could be true. But VA loans don’t require perfect credit. In fact, the VA does not enforce a minimum credit score requirement. Most lenders will require some kind of minimum score, but it is generally far lower than the requirement for a conventional loan.
Lower closing costs
When you buy a home, you’re going to be on the hook for closing costs. This can include homeowners insurance, prepaid taxes, and agent fees. Many buyers don’t anticipate these costs and are surprised at how much they’ll need upfront in order to close on a home. But another one of the benefits of a VA loan is that the amount of the closing costs that are charged to veterans is limited.
Qualify more than once
VA loans aren’t a one-and-done kind of thing. You don’t get one shot at using a VA loan and that’s it. If you qualify, then you can get a VA loan as many times as you like. The benefit has no expiration. You may even have more than one VA loan simultaneously.
No penalty for prepayment
Finally, when you get a VA loan, you won’t be charged if you pay off your loan early. With conventional loans, if you pay off a loan ahead of schedule you may be charged extra fees. This is because the lender will be missing out on all those extra interest payments. But when you pay off early with a VA loan, you won’t be penalized.