The VA mortgages are a good option for people who have served in the military and have low credit scores. They offer lower down payments and better rates. Such mortgages provide service members, veterans, active military personnel, and spouses financial benefits unmatched by others in the market. VA mortgage loans come with plenty of benefits that have boosted its growth over the past decade.
No Down Payment
The VA mortgage is an excellent option for buying a home if you do not have a down payment. A VA mortgage has no down payment requirement and offers competitive rates. Therefore, veterans need to have lump sums to secure a home.
The down payment is the money a person pays for a house upfront. In the United States, the usual minimum down payment is 3.5% of the mortgage and 5% for conventional financing. Saving such massive amounts can prove difficult for service members that are always moving. Once you qualify, the loan finances the home’s value with a VA mortgage.
No Private Mortgage Insurance
The VA loan is one of the most popular loans in the United States. One of the great features of this loan is that no private mortgage insurance (PMI) is required.
PMI is insurance that protects the lender by promising to cover the difference between your mortgage and the value of your property. It offers protection to the lender if you default on your payments. It may be required in some cases when a borrower doesn’t have enough money saved to make up for the difference.
Most conventional lending institutions require borrowers to pay PMI and only exempt those that pay at least 20% of the mortgage. This percentage can be challenging to raise for most veterans. Therefore, veterans can save thousands over the years with a VA loan. Furthermore, it improves service members’ purchasing and saving power who desire VA homes for sale.
Favourable Interest Rates
VA loans are available at competitive interest rates compared to conventional mortgage plans. These rates are favourable and allow veterans to save their money. In addition, VA loans provide their clients with the lowest interest rates that are fixed. Reports from ICE Mortgage Technology indicate that VA mortgages have offered the lowest average interest rates for the past three decades.
Relaxed Credit Requirements
VA loans usually come with relaxed credit requirements. It allows veterans to have credit issues such as recently going through a divorce or bankruptcy. These situations may have adverse effects on conventional mortgage rates. However, with VA loans, these issues are not difficult to resolve.
In addition, the Department of Veterans Affairs does not issue loans and only oversees the loan program. Therefore, it does not enforce or set the credit score minimums. Most lenders that offer VA loans utilize credit score benchmarks to aid in assessing a person’s risk of default. Although these credit scores might differ, VA lenders offer minimums lower than conventional mortgages.
Veterans and surviving spouses do not need a perfect credit score to access loans to purchase a home. Moreover, VA loans are more forgiving during financial constraints, such as short sales, foreclosure, divorce, and bankruptcy.
Closing Cost Limits
Unlike most mortgage plans, the VA loan has flexible closing cost limits. For example, a VA home loan has a maximum origination fee of 3.3% of the loan amount and a maximum prepaid expense of 3.3% of the loan amount.
The total combined fees cannot exceed six percent in most cases. However, VA borrowers can request the seller to service all their loan-related closing costs to cover expenses like prepaid taxes and insurance.
No Prepayment Penalties
VA loans lack prepayment penalties, which allows homeowners the freedom to refinance their loans without paying fees. The VA loan program gives veterans and their surviving spouses’ flexibility throughout their mortgage experience. Therefore, veterans can service their loans at any point without worrying about attracting prepayment penalties.
Down Payment Assistance
In rare cases, some lenders offer assistance through the available grant program for eligible borrowers. Such a grant program can provide down payment and closing cost assistance in some cases. This allows veterans to get back to their feet and bounce back financially.
Variety of Loans
VA loans come in a variety of loan packages. These varieties include interest rate reduction refinance loans, energy-efficient mortgages, cash-out refinance, and purchase loans. You can explore other loan variants to get a package that suits your needs.
VA mortgages and loans offer service members plenty of opportunities and benefits. If you qualify for a VA mortgage, consider getting one because of the lifetime benefits and competitive rates.
Author Bio: Kellie is a copywriter and content strategist. She helps businesses stop playing around with content marketing and start seeing the tangible ROI. She loves writing as much as she loves cake.