Veteran Affairs Home Loan is a Way of Helping our Soldiers
A VA loan is one of the most powerful lending options that prevails in the market today. The VA mortgage is a type of home loan that is made available to veterans as well as their spouses. It was created at the end of WWII to help soldiers returning from the war buy homes as most of them didn’t have money for a down payment or an established credit history.
When you get a VA home loan, the Department of Veterans Affairs doesn’t loan you the money, but simply backs your mortgage which originates at a private lender, like a bank. If for some reason, you don’t make your loan payment, the VA repays the loan for you. This is why VA mortgages aren’t risky to a lender and have favorable interest rates and down payment requirements.
VA Loans versus Conventional Home Loans
VA loans are some of the only loans remaining that offer absolutely no down payment at all. In the case of conventional loans, the buyer is required to provide up to 20% down payment which often makes it difficult to purchase the right type of home. With a VA home loan, there is no private mortgage insurance and this can save hundreds of dollars a month over conventional loans depending on how much you borrow. As VA loans are backed up by the government, the rates are often much better than a conventional loan which helps to save a considerable amount of money over the life of your home loan. VA home loans have a more lenient lending policy enabling you to qualify for a VA loan when you might not be able to meet all the requirements of a traditional loan.
Key Benefits of A VA Loan
One of the most significant benefits of a VA home loan for new construction is that the borrower can purchase their home with no money down. VA loans come with less stringent underwriting standards and requirements when compared to conventional loans. The loans also come with no private mortgage insurance, PMI which is a monthly expense that conventional borrowers are required to pay unless they put down a minimum of 20% of the loan amount. Other key benefits include:
- No prepayment penalties
- The interest rates are lower when compared to regular rates
- Higher debt-to-income ratios in comparison to many other loans
- Streamlined refinancing loans that require no additional underwriting
Less than 10% of the nation’s 25 million veterans have taken advantage of the home loan benefits earned by their service. Some veterans believe that they are ineligible, some are unsure of how to take action while the rest are completely unaware of the VA loan guaranty program.
VA home loans can be one of the best ways to buy a house if you qualify. If you’re a veteran or active member of the U.S Armed forces, a VA mortgage should be on your list.