A home purchase is among the most important purchases you can make in your life — and if you’ve served in the military, you may qualify for a veteran home loan (or VA loan) that can help make the process of buying a home much easier.
The VA loan can be used for a number of purposes, including:
- Purchasing or building a new home
- Refinancing a current mortgage
- Repairing or improving your existing home, or installing home efficiency measures
How does a VA loan give you an advantage over a regular home loan? Here are some of its prime benefits:
No down payment needed: The VA guarantees purchases for qualified veterans. This enables banks and mortgage lenders to offer loans with little or no down payment. This is especially helpful if you’re getting a conventional or FHA mortgage, where you’re responsible for mortgage insurance unless you can put down a sizable downpayment. For example, if you put a 3.5 percent down payment on a $200,000 FHA-insured mortgage loan, you would pay $100 a month on mortgage insurance alone — money you could save by using a VA loan.
A guaranty amount of $453,100 (or even higher): The VA loan program has a guaranty on all loans of up to $453,100, and if you happen to live in a high-cost county, the guaranty can be even higher.
Lower closing costs: The VA limits fees and costs that veterans pay at the time of closing. Homebuyers can ask sellers to pay all of their loan-related closing costs and up to 4 percent of the purchase price for things like prepaid taxes and insurance, collections and judgments.
Easier to qualify than with a conventional loan: Loans can be difficult to qualify for, especially if you’ve had credit issues in the past, but you can secure a VA home loan just two years removed from a foreclosure, short sale or bankruptcy.
Refinance without requalifying: With the VA Streamline Refinance loan, you can often refinance to a lower mortgage rate within the VA program without needing to re-qualify.
Cash-out refinance: You can utilize the refinance on your loan to pay off debt, make repairs to your home, remodel, or spend any way you wish.
Assistance in avoiding foreclosures: The VA offers foreclosure avoidance advocacy, with staff members who can advocate on your behalf.
No prepayment penalties: Are you capable of paying off your mortgage ahead of schedule? There’s no prepayment penalties when you use the VA loan.