For veterans and active-duty military who qualify, a VA home loan is usually the best option to finance the purchase of a home. In this blog, we’ll go over the benefits of a VA loan compared to other types of mortgages.
What are the benefits of a VA Home Loan?
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In most cases, no down payment is required (see below for more information)
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In addition to not having a down payment, there is also no mortgage insurance on VA loans (but there may be a funding fee).
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VA loans often provide better interest rates than conventional loans.
VA Home Loans do not require a down payment if the veteran has not previously used their home loan benefits and the loan amount of the mortgage is within established VA limits. These limits are based on the state and county where the home is located. You can find those limits here.
Important considerations for VA loans
For veterans who have used their home loan benefits before, no down payment could still be an option, but this is dependent on other factors. Other than VA loans, there are very few mortgage options with no down payment. Keep in mind, conventional loans require at least 3% of the sales price for a down payment, and FHA loans require 3.5% down.
VA loans: mortgage insurance vs. funding fee
Mortgage insurance is an extra fee paid by the home buyer on loans with less than 20% down on a conventional loan which provides additional protection for the lender in the case of a default on the loan. Mortgage insurance rates vary depending on loan-to-value, credit scores and other factors, but regardless, they raise the cost of buying a home.
VA loans do have a “Funding Fee” which is paid to the Veterans Administration at the time of settlement. The amount of the funding fee varies depending on if the veteran has used their VA Home Loan benefits before or if there is any down payment requirement. However, even with the funding fee, VA loans can often save veterans money compared to conventional and FHA loans because of their often-lower rates and lack of down payment requirement and monthly mortgage insurance. And the VA Funding Fee can be financed as part of the loan amount.
And some veterans are exempt from having to paying the funding fee! Ask us more about that.
Bottom Line For Homebuyers
If you are active duty or retired from the military, a VA Loan may be the best mortgage option for you! No down payments or monthly mortgage insurance are just two of the great benefits to VA loans. As a veteran, you may even score a better interest rate with a VA loan than you would with a conventional loan. Connect with us today to find out more!
