When it comes to finding a home for you and your family, getting the best possible mortgage sets you up for success. For those who are eligible, a VA (Veteran’s Administration) mortgage loan offers a number of enticing benefits that may make sense for your home purchase. Here are some of the biggest advantages of VA loans:
1. No money down required. Coming up with a large down payment is a huge barrier for many homebuyers. For a $200,000 home, a standard 20 percent down payment is $40,000. That is a lot of money for most families to save up. With a VA loan, so long as the purchase price doesn’t exceed the appraised value of the home, no down payment is required.
2. No private mortgage insurance (PMI) required. With traditional loans, if you require financing for more than 80 percent of a home’s appraised value, you’ll most likely be required to pay PMI monthly, which protects the lender if you default on the loan. This can cost many borrowers an extra $100 to $200 a month though some lenders have options that do not have a PMI requirement. Click here to read more about Navy Federal’s options. VA loans, on the other hand, do not require PMI, even when receiving a loan for the entire appraised value of a house.
3. Strict limits on closing costs. Closing costs for traditional mortgage loans can add up quickly, but with a VA loan, strict limits are imposed on what closing costs are allowed.
4. Lower interest rates. Because VA mortgages are partially guaranteed by the VA, lenders are encouraged to offer more favorable terms than conventional loans. This can often translate into lower interest rates than those for conventional mortgages.
5. Potentially lower minimum credit score to qualify. The VA doesn’t set a minimum credit score requirement, although many VA lenders have guidelines for minimum credit scores for qualification. Your lender may look past your credit score to see your unique financial situation to help get you the best VA loan possible.
6. No prepayment penalty. Traditional mortgages may penalize you for paying off your loan early, but with a VA loan, there is no penalty for eliminating your mortgage ahead of schedule. If you’re able and decide that you want to pay off your mortgage, you’re not forced to keep unnecessary debt.
Ready to get started on your path to homeownership? Start with getting pre-approved for a mortgage that fits your needs and goals.