Have you ever wondered why the U.S. Department of Veterans Affairs (VA) oversees a loan program that enables private lenders to offer loans with favorable terms to service members and vets? Consider the organization’s mission statement: “To fulfill President Lincoln’s promise ‘to care for him who shall have borne the battle, and for his widow, and his orphan’ by serving and honoring the men and women who are America’s veterans.” The VA loan program is meant to serve those who serve their country. What else should you know about VA home loan benefits?
VA Home Loan Benefits
With today’s mix of historically low interest rates and tougher lending requirements, you can certainly make the argument that there’s never been a better time for eligible service members and vets to utilize their housing benefits to buy homes with VA loans. However, it’s even easier to argue that it’s always a good idea for eligible borrowers to consider using a VA loan due to their many advantages.
Flexible Credit Requirements for Borrowers
Thanks to the guaranty that the VA gives lenders when they extend a VA loan, lenders are willing to be a bit less strict with their credit requirements (source). While VA borrowers still need to have good enough credit to secure approval for the loan that they’re seeking, the VA prompts lenders to look at the bigger picture when reviewing borrowers’ credit history instead of narrowly focusing on specific numbers like debt-to-income ratios and credit scores.
No Down Payment
The fact that these loans don’t require a down payment is one of the best-known and most well-loved VA home loan benefits. As Military.com notes, borrowers using a VA loan can finance 100 percent of their home purchase as long as its price tag is at or below the conforming loan limit for their county. Saving a down payment large enough to meet the requirements of other loan programs can take years. By allowing its borrowers to skip the down payment, the VA loan program helps eligible service members and veterans become homeowners without the wait.
No Private Mortgage Insurance
As the Consumer Financial Protection Bureau explains, private mortgage insurance (PMI) protects the lender in the event that a borrower stops making their payments. If you opt for a conventional loan and make a down payment of less than 20 percent, you’ll likely be required to pay for this insurance in the form of a monthly premium that’s added to your mortgage payment. Fortunately, VA borrowers don’t have to worry about insurance because there is no PMI requirement with a VA loan. Avoiding PMI keeps your monthly mortgage payment lower and results in significant savings over time.
Limited Closing Costs
According to Investopedia, the average homebuyer should expect to shell out between two and five percent of their sale price in closing costs. While VA buyers will have to pay some closing costs, they’ll typically pay less than borrowers using other loan programs. Why? The VA sets firm limits regarding what its borrowers can be charged at closing.
The VA sets Minimum Property Requirements for homes purchased with its loans. As MilitaryTimes points out, these requirements are there to protect buyers by ensuring that any property that they purchase is safe, sanitary, sound, and livable.
Service After the Sale
The VA doesn’t consider its job done when the closing is over. Borrowers who run into trouble making their payments can reach out to the VA for free financial counseling. In fact, the VA automatically assigns a VA loan technician to any VA loan that is 61 days overdue.
At PrimeLending of Wichita, we are honored to serve those who serve and protect us. That’s why we offer VA loans with no lender fees. Are you an eligible service member or veteran who is wondering if a VA loan could be the key that opens the door to homeownership? Contact us today to speak with one of our knowledgeable loan experts.