One of the powerful mortgage options for veterans, surviving spouses, and active military is VA loans. The power of VA loans comes from essential financial benefits, which you will not find in other types of mortgages. Due to these benefits, the volume of VA loans has increased considerably in the past 15 years. The program has assisted millions of military families, service members, and veterans to own their homes.
Here we will explore the benefits of the VA loan.
1. Lacks Private Mortgage Insurance
The insurance that protects money lenders when a borrower default is private mortgage insurance. Most lenders need borrowers to pay monthly PMI if they cannot raise 20 percent of the mortgage, which is challenging for most veterans.
Unlike FHA and conventional loans, the VA loan does not need monthly private mortgage insurance payments. This allows most veterans to increase their power to save and buy.
2. Exemptions of Funding Fees
For every VA loan a veteran gets, there is a governmental VA funding fee. The funding fees help to fund the program by offering the lender an insurance policy. According to the VA funding fee chart, your pay varies based on the type of service, loan amount and type, prior VA use, and down payment, if any. However, some veterans get exempted from paying the funding fee if they fall in any of the following categories:
- A service member with a memorandum or proposed rating stating their eligibility for compensation due to a pre-discharge claim
- Surviving partner of a veteran who passed away while in service or from a disability linked to service or a disabled veteran receiving DIC (Dependency and Indemnity Compensation).
- A veteran receiving disability compensation for a disability associated with service
- A service member is eligible for VA disability compensation but is receiving active-duty or retirement pay instead.
- A veteran on active duty who, before the date of the loan of closure, shows evidence of receiving the Purple Heart.
3. No Down Payment
One benefit of a VA loan is any qualified veteran can purchase a mortgage without a down payment. This permits the veterans to buy homes without spending many years saving a huge sum of money.
The minimum down payment you can get on an FHA loan is 3.5%, while you get 5% for conventional financing. For an average veteran, that is a huge sum of money.
4. Competitive Interest Rates
VA loan program has the lowest fixed rates in the market, which saves the veterans a huge sum of cash over the years. For the past six years, VA loans have recorded the lowest average 30-year interest rate. The interest rates of VA loans are lower than conventional rates by around 0.5 to 1%.
5. Lifetime Benefit
Most people think that the VA mortgage program is a one-time benefit, but that’s not true. Any veteran qualifying for the loan can use the program over and over since the is no expiry.
Also, you do not have to repay your full loan to benefit from the program. This means that you can apply for another loan even though you have not cleared the first one.
6. No Pre-payment Penalties
You are likely to find that you will get a pre-payment penalty in other forms of loans if you pay your home loan before the maturity period. This is because the lender will no longer get the interest payments.
On the other hand, VA loan permits borrowers to repay their home loan, and no one will ask for a pre-payment penalty. As a borrower, you are free to consider home purchases and options for refinancing without worrying about the pre-payment penalty.
7. Accessibility to Variety of Loan Types
The VA loan program has numerous financing options. Veterans are not limited to purchasing homes with the VA loan they get. They can also make home upgrades that promote energy efficiency, take equity from their home, and refinance the reduced interest rates.
Here are some of the loans they can access:
- VA purchase loans
- VA IRRRL loans
- VA Energy Efficient Mortgage (EEM)
- VA Cash-out Refinance
VA loan program provides numerous benefits to the veterans. For instance, veterans can enjoy numerous categories of loans that do not limit them to buying homes. Also, they do not require a down payment to acquire the loan. Explore the above-discussed benefits to find out more advantages of the VA loan program.