3 Big Ways VA Loans Can Save You Thousands

In this Jan. 8, 2015, file photo, a sign with a sold sticker is posted in front of a row of new town homes in Richmond, Va. Who is eligible to use VA home loans? Steve Helber/AP

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. VA loan volume has soared in recent years.

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 8-in-10 VA borrowers purchase without making 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.

On a typical $275,000 home purchase, VA borrowers would need a down payment of nearly $14,000 for a conventional loan and about $10,000 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 facing the prospect of paying for mortgage insurance. 

Conventional loans often require private mortgage insurance for buyers who can't put down 20 percent of the purchase price. FHA loans come with both upfront and annual mortgage insurance premiums. 

Those types of expenses 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. Interest rates on government-backed mortgages generally tend to be lower on average than conventional loans, with average VA rates leading the way.

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. Click here to learn more about VA loan rates. 

But this general trend is just one more way VA loans make a tremendous difference for those who serve our country.