First-Time Homebuyers & the Advantages of VA Loans

Suburban family home.

Reasons to choose a VA loan are numerous, but first-time homebuyers who qualify may have added benefits when using their military home loan entitlements.

No Down Payment Option

Often first-time homebuyers have not accrued enough savings for a down payment on a home purchase. And first-time homebuyers do not have proceeds from the sale of a prior home to put toward their real estate purchase. VA home loans enable eligible borrowers to buy a home with as little as zero money down. When compared to most other mortgage programs that may need between 3.5 and 20 percent cash down, a VA-guaranteed mortgage can help first-time borrowers retain any savings they do have for future use.

No Private Mortgage Insurance (PMI) Required

Because most first-time homebuyers do not have 20 percent to put down, they will likely be required to pay private mortgage insurance (PMI) if they use a conventional loan program. This is another reason why many first-time borrowers love the VA mortgage program. Most mortgage programs require monthly PMI – and some even require payments upfront – from borrowers with less than 20 percent cash down. The VA backs a portion of every VA loan, which does away with the need for PMI. The absence of PMI can save hundreds each month.

Relaxed Credit Qualifications

For a first-time homebuyer, establishing credit can take time. Many conventional mortgage programs have stringent credit qualifying guidelines. VA qualifying guidelines can be more relaxed than those of conventional mortgages. Therefore, first-time homebuyers with shorter credit histories may still qualify based on VA guidelines. The lender has flexibility to decide whether the potential VA borrower is a good credit risk. VA-approved lenders consider a borrower's credit, debt-to-income ratio, residual income and other factors to determine whether a military member qualifies.

Lower VA Funding Fee

Among those who use the VA home loan program to purchase a home, first-time homebuyers experience the lowest VA funding fee (save surviving spouses and disabled vets who are exempt from this fee). Most first-time VA loan users will pay 2.15 percent.

One of the major milestones in life is buying that first home. Many first-time homebuyers appreciate any help they can get when it comes to saving money. Money saved by first-time homebuyers as a result of choosing the VA home loan program over other programs that require more money up front can be put toward moving costs, home improvements or future planning like college funds and retirement accounts.

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