Reaching a point in life when you can buy a home is hard work. And if you are a veteran or you serve in the army, it can be a greater challenge compared to people who are not. What options do you have if you are a veteran and want to buy a house? Well, there’s one mortgage option specifically for veterans: a VA loan. Are VA loans good?
What is a VA loan?
The VA loan is a mortgage that is provided by private lenders and supported by the US Department of Veterans Affairs. He helps US veterans, active servants, and widowed military spouses to buy a home.
VA loans were introduced under the GI Bill in 1944, but they have become increasingly popular in recent years. In the first quarter of 2019, 8% of home purchases were made with a VA loan. This type of loan is an attractive option because it is easy to qualify and requires no down payment.
Benefits of a VA home loan
Let’s take a look at some of these benefits now and recall once again how VA home loans are really beneficial. This is an advantage that civilians do not enjoy and it is actually an allowance.
The most obvious benefit is the lack of money option. The veteran does not require any advance payment unless the loan exceeds the maximum guidelines of the lender VA. Most loans are limited by VA lenders at USD 417,000, which is higher in some areas considered “high costs”.
Everyone who buys a home knows how difficult it is to save enough funds for an advance payment and closing costs. Even FHA loans, which require a down payment of 3.5 percent, can still be challenging, especially for first-time home buyers who save and save on buying their first home. Zero down is a huge plus.
When there is no point in using a VA loan
Still, the experts we spoke to said there were scenarios in which a VA loan would be less favorable than traditional financing. You can use a traditional mortgage if:
- You are using the VA loan for the second time: because the VA financing fee depends on several factors, including whether you have used a VA housing loan in the past, it is worth taking advantage of the traditional financing of the second property purchase.
- You are buying an investment property.
- You buy a property that is not eligible for a VA loan.
- You have 20% down payment. If your prepayment is large enough to avoid paying PMI, you should definitely compare the rates and terms of both VA loans and traditional home loans.
- The house you want to buy is too expensive. VA loans have limits that may make it difficult for veterans to buy in expensive real estate markets.
Take into account all costs, interest rates and monthly payment for all credit options. You should also consider your short- and long-term plans. By choosing numbers and working with specialists with knowledge about VA loans, you can find out which path to choose.