Buying a home is a huge investment that not a lot of people can afford, but it’s a little easier for military personnel thanks to the Veterans Affairs Home Mortgage Loan program.
The program offers a number of benefits to active members, veterans, and some surviving spouses and can be used for purchasing a house, refinancing a mortgage, or funding improvements to an existing home.
Here are the top six benefits of using a VA loan:
1. Borrowers don’t need to have a minimum credit score — According to Military.com, the VA Loan program won’t just look at your credit score when considering your loan.
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Instead, they look at your credit history, going back about 12 months and using what Bankrate calls “common-sense credit underwriting."
Bankrate reports that private companies will sometimes check your credit history going back four or even seven years.
2. No down payments — According to VAloans.com, in most cases, lenders aren’t required to put a down payment on their loan.
Traditional loans usually require a 5 percent down payment, which, depending on the size of the loan, could be a sizable amount.
But as Forbes points out, if the purchase price is lower than the appraisal price, a down payment isn’t needed for a VA loan.
3. Lower interest rates — According to Forbes, interest rates on VA loans are slightly lower than the rates offered by conventional loans.
Looking at general 30-year fixed loans, VA loans are an average of .60 percent lower.
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4. You won’t need mortgage insurance — According to Bankrate, most borrowers who can’t come up with a 20 percent down payment on their loan are expected to take out mortgage insurance in case they default on a payment.
The insurance could end up costing homeowners an extra $100 a month.
Since a down payment isn’t necessary for VA loans, neither is mortgage insurance.
VA loans do come with a funding fee that keeps the program running, but most lenders choose to roll this into their loan.
5. VA loans are assumable — The Mortgage Report explains that assumable loans mean if you decide to sell your home, you can transfer your VA loan to the buyer, as long as they are also eligible for a VA loan.
6. Lower closing costs — According to The Mortgage Report, the VA helps their applicants by putting a limit on the closing costs lenders charge them.
The VA Loans website says sellers can be asked to pay up to 4 percent in concessions and all of the buyer’s loan-related costs.
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