The VA Loan Guarantee Program was first created back in 1944 as a way to help service members returning from WWII to start settling back in to civilian life and become homeowners. Today, this plan is still available to active duty service members and veterans alike. This type of loan has many benefits associated with it, which are worth exploring in further depth.
Because the Department of Veterans Affairs helps to secure the loans, this means that service members have access to competitive rates and loan conditions. This can be particularly helpful for those looking to secure a loan for their first home, although the loans are quite flexible and can be used in many ways. The following are a few of the main advantages associated with obtaining a VA loan.
- No down payment required – The main benefit for many people is that there is no need for a down payment in order to secure a home loan. There are very few other ways to find a loan with 100 percent financing today.
- Competitive interest rates – These VA loans are associated with far lower interest rates than conventional home loans.
- No private mortgage insurance – Private mortgage insurance, or PMI, is normally a monthly expense that borrowers have to pay. It can range anywhere in the range of $50 to $150 in most cases per month, and is required for any borrowers who have not paid a 20% down payment. However, there is no need to pay this insurance with a VA loan.
- A limit on closing costs – While lenders can usually charge you whatever closing fees they like, when you have this type of loan the VA helps regulate the closing costs, allowing for the seller to pay for them.
- Additional financial assistance – Should you default on your loan or allow it to become delinquent, the VA steps in and helps you work with the loan servicer. It is their mission to help you overcome hardship and find financial assistance when needed.
These are just a few ways that a VA loan can be different from conventional home loans. They are designed to make it easier for veterans to purchase homes, no matter what your current financial situation might be like. Under normal circumstances the dream of owning a home might be impossible, but with the various benefits that the VA gives you, it's possible to find the terms that will fit your financial needs.