The benefits of serving in the United States military are significant. Affordable healthcare, retirement pay and tuition assistance are just a few of the reasons why people join up. Many Veterans, however, aren’t aware that easy financing through VA home loans is an attractive alternative to traditional mortgage options in their journey to homeownership. Here are just a few of the ways VA home loans differ from other mortgage options:
You Don’t Need a Down Payment
Saving 20 percent for a down payment is a difficult proposition for most Americans. Though not strictly required, that figure has been the standard down payment for decades. Even the more lenient conventional home loans require at least 3.5 percent down. VA home loans, on the other hand, do not require any money down. Rather than waiting to save thousands of dollars for a down payment, Veterans can buy immediately.
In most cases, buying a home without 20 percent down requires a monthly private mortgage insurance (PMI) payment. Veterans, however, are not subject to PMI requirements on VA home loans. Simply by using a VA home loan, Veterans save thousands of dollars that they can put toward the purchase price or upgrading of their new home.
Your Benefits Don’t Expire
If you use your VA home loan benefits, you’re welcome to use them again and again for the rest of your life. That means your small starter home you’ve outgrown can be a stepping stone to a larger house to accommodate your growing family.
Benefits never expire, either. So long as eligibility can be established, Veterans may use their home loan benefits regardless of when they have served. Based on when and how long a person served, eligibility can be determined at the VA’s website. If you would prefer a more personal touch, a SoCal VA Homes Client Service Specialist can help you determine your eligibility.
Credit Scores Won’t Make or Break Your Application, But Not Being Able to Put Food on Will!
Those with low credit scores often believe homebuying is out of their reach. With VA home loans, however, lenders underwrite using a variety of tools to understand a person’s full financial picture. One such tool? Residual income. This is the amount of money a family has left over after paying bills each month. This figure helps paint a picture as to whether a person can manage a monthly mortgage payment. Including this calculation into the process is why so few VA home loans result in foreclosure.
Let’s say Tom wants to buy a home for his wife and two kids. During the home loan application process, Tom’s credit score, debt-to-income ratio, and his residual income will be considered. After bills are paid each month, Tom takes home $1,200. Now the underwriter knows Tom can put food on the table and make his mortgage payment! This figure makes it clear: Tom and his family can handle a mortgage payment based on his current residual income.
VA Loan Rates are More Affordable
Conventional loans sometimes feature high-interest rates that make homeownership less palatable. Thankfully, VA loan rates are, on average, .25 percent lower than those of conventional loans. Each lender sets its own interest rate. Because the loans are backed by the VA, though, they are considered lower risk than the average home loan. The savings associated with lower interest rates are passed on to the Veterans. Generally, Veterans will be hard-pressed to find interest rates lower than what they can get via VA home loans.
Save even more money by making extra payments whenever possible. Unlike other home loans, VA home loans have no pre-payment penalty. Over the lifetime of a loan, an extra hundred dollars here and there can result in thousands of dollars of savings in interest payments. Pay enough extra and you may shave months, or even years, of payments from the lifetime of your mortgage.
Veterans are Eligible for VA Home Loans Even with a History of Bankruptcy and Foreclosure
When it comes to our finances, past decisions often come back to haunt us. This is not so when applying for VA home loans. VA guidelines require no minimum credit score. When it comes to VA home loans, lenders primarily consider your most recent financial history.
You worked hard to serve your country. Your family may have made sacrifices to allow for your service. These sacrifices are recognized through VA benefits like home loans. Take the VA up on their offer. With so little standing in your way, why not begin exploring your VA home loan options today?