Three Big Ways VA Loans Can Save You Thousands

VA loans offer a host of significant benefits.

This historic benefit program helps open the doors of homeownership to veterans and service members who might otherwise struggle to secure home financing. About 40 percent of VA purchase loans went to first-time homebuyers last year alone.

This is a loan program that can save qualified borrowers thousands of dollars, both in terms of upfront costs as well as over the life of their loans. Let’s take a closer look at three key ways.

$0 Down Payment

Of all the benefits of VA home loans, this remains the most noteworthy – and most powerful. This is the largest $0 down loan program on the market, and it’s helped millions of service members and veterans achieve the dream of homeownership since 1944.

Not having to make a down payment is an incredible benefit for homebuyers, especially first timers. About 85 percent of VA borrowers last year secured a loan without having to make a down payment.

For some context, conventional loans typically require at least 5 percent down. The minimum down payment for FHA loans is 3.5 percent.

The average VA loan last year was about $235,000. Given that loan amount, VA borrowers would need a down payment of nearly $12,000 for a conventional loan and about $8,200 for FHA financing.

That’s a huge chunk of change that can take consumers years to save. But it’s not a cost that VA homebuyers have to worry about.

No Mortgage Insurance Even if you can handle a 5 percent or 3.5 percent down payment, both conventional and FHA borrowers would be stuck paying for mortgage insurance unless they could put down 20 percent of the purchase price.

That could add anywhere from $50 to $200 or more to your mortgage payment each month. Conventional borrowers can usually stop paying mortgage insurance once they establish about 20 percent equity in the home. But FHA buyers now pay this extra cost for their entire mortgage term.

There’s no mortgage insurance on a VA loan.

Lower Interest Rates It’s a common misnomer that VA mortgage rates are always higher than conventional rates. Actually, interest rates on government-backed mortgages generally tend to be lower on average than on conventional loans.

Getting a lower interest rate can save a lot of money when you’re talking about a 30-year loan. On a 30-year fixed-rate $250,000 mortgage, a note rate of 5 percent means a principal and interest payment of $1,342 each month.

Drop the rate to 4.25 percent, and the monthly principal and interest payment falls more than $110.

Interest rates can vary depending on the lender, the borrower’s financial and credit profile and other factors. But this general trend is just one more way VA loans make a tremendous difference for those who serve our country.

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