Since its inception in 1944, the Veterans Administration loan program has helped over 18 million veterans and their families become homeowners. Last year alone, the Department of Veterans Affairs guaranteed nearly 630,000 loans -- an all-time high. Yet a surprising number of military members (20%) have never heard of a VA loan, and even more are unaware of its advantages. Here are three of the biggest.
1. Zero down
Getting a loan with no down payment is practically unheard of these days -- unless you’re taking out a VA loan. That’s because Veterans Affairs guarantees purchases for qualified veterans. This enables banks and mortgage lenders to offer loans with little or no down payment.
2. No private mortgage insurance
People who take out conventional loans are generally required to pay private monthly mortgage insurance unless they’re able to pay down at least 20% of the home’s value. However, the federal government backs all VA loans and assumes the risk on behalf of the borrower, eliminating the need for this type of insurance.
3. Better interest rates
Because the government backs the loan, lenders carry less risk and can offer competitive interest rates -- typically between .5 and 1% lower than a conventional loan. Best of all, the interest rates are fixed, which means they’re not subject to fluctuations in the housing market.
It‘s also important to note that there’s a one-time funding fee applied by Veterans Affairs for a VA loan. The fee varies, depending on the type of military service and amount of down payment. Even with this fee, a VA loan is almost always a smarter financial move than a conventional loan.
Your First Step
The first step toward getting a VA loan is determining whether or not you’re eligible. After establishing your eligibility, you’ll need to provide a Certificate of Eligibility (COE) to your lender. You can find eligibility and COE information here.
Philip Kneibert, NMLS # 10680, Managing Owner & President of Mortgage Lenders of America.