PCS season is upon us. And that means you may be preparing your household for the next move.
While my military days are well behind me, my family is also on the brink of a move. During the past two years, we’ve laid the foundation for what I hope will be a smooth process. We’ve done the same things I would encourage you to do before embarking on the adventure that is home ownership: We’ve socked away cash, we’ve checked and rechecked our credit reports, and we’ve built a “new home” budget that includes all the costs of ownership. Of course, we’ve also committed to owning the property for the long haul.
As I write this, we’re looking at mortgages. And although it’s been a while since I wore the uniform, we’re considering a Department of Veterans Affairs Guaranteed Home Loan, or as it’s more commonly known, a VA loan.
It’s an option you may want to consider, too. Here are six reasons a VA loan can be a good fit:
No Down Payment and PMIThis may be a VA loan’s biggest draw. With a conventional loan, you’ll typically need a 20% down payment or you’ll be required to purchase private mortgage insurance (PMI). Not so with the VA. Unless you’re receiving VA disability compensation, VA loans require you to pay a funding fee, but they don’t require a down payment or PMI.
Competitive RatesThe VA doesn’t set interest rates, the lender does. That means the rates are competitive with any other type of loan. And in some cases, they’re better than conventional loans. As I mentioned earlier, it’s important to have your credit score and overall finances in tiptop shape before applying for any mortgage. It’s also critical to shop around for the best terms and rate … even with a VA loan.
Buyer TakeoverIn certain situations, the VA will allow another buyer to step in and assume your loan. If interest rates continue to rise, this could be a nice feature. While the new buyer would have to come up with the cash difference between the loan value and the house’s market value, the terms of the loan could be a lot more favorable, and the cost of the transaction could be substantially less.
It’s Pretty Darn QuickLong gone are the days when processing a VA loan was a never-ending marathon, relative to the sprint offered by its conventional counterpart. Today, using the VA’s automated system, your lender can get an electronic “certificate of eligibility” from the VA and close your loan in just a few weeks — not much different from a conventional loan.
You Can Use It More Than OnceContrary to a common misconception, you can use a VA loan more than once. If you’ve paid off the previous loan, all of your entitlement is restored, and you’re eligible to use another VA loan. One note: subsequent use may require an increased VA funding fee.
You Can Use It To RefinanceAlthough rising interest rates are shrinking this opportunity, you can also use a VA loan to refinance a conventional loan or another VA loan. If you’ve already got a VA loan, the Interest Rate Reduction Refinance Loan is a pretty sweet option. I know — I’ve used it twice. It has just a 0.5% funding fee, and there’s no appraisal or financial underwriting required by the VA (lender’s requirements may vary).
I’m not sure whether we’ll ultimately pursue a VA loan, but I do know one is worth considering. Visit va.gov and talk to your lender to learn all the details. But remember, VA loan or not, the smartest move you can make is to ensure the decision to buy is appropriate given your own personal circumstances.