Veterans, active military professionals, and surviving spouses have access to the VA loans. VA loan programs are established by the Department of Veterans Affairs to assist veterans avail home financing for the improvement of their current homes, refinancing or buying new homes. The most notable benefit of the home loan financing program is the ability to purchase a home without a down payment. It is an attractive option for military professionals who often face obstacles accessing conventional loans due to poor credit scores. In this blog post, we take a closer look at the pros and cons of VA loans. Read on
No Down Payment
VA loans don’t require any down-payment and appraisal fees. The loans also don’t require any private mortgage insurance (PMI). This definitely comes as a great advantage as you can easily save a huge amount of cash.
No Penalty for Prepayment
Ideally, having enough cash to prepay a loan is good, but other loans may come with penalties, which are mentioned in your contract. In VA loans, however, there are no penalties for paying off the loan before your repayment period is over.
Relaxed Credit Requirements
Most prospective home buyers will agree that lenders usually have tight credit requirements. The credit score required for VA loan financing is, however, low, compared to requirements for conventional mortgages.
Minimum Interest Rates
Interest rates on mortgage loans are determined by the risk the bank is accepting by financing the loan. As VA loans are typically backed by a guarantee, interest rates are much lower than conventional loans.
Mandatory Funding Fee
All VA loans come with a mandatory funding fee, however, borrowers with service-connected disabilities are exempt from paying the fee.
Designed for Primary Residencies
VA loans are for primary residencies and can’t be used to purchase vacation homes or investment properties. Veterans and active military professionals have to prove that they personally intend to occupy the property; essentially, home buyers have sixty days to occupy the home after the loan closes.
VA loans, like any other conventional loan, are based on the borrower’s credit history, assets, income, and debt. VA loans also come with a mandatory funding fee. As homebuyers, it is always advisable to compare different types of loans, and choose one that caters to your individual needs.