VA Loan Features
Recent estimates put the number of veterans and military personnel who have benefitted from VA loans at over twenty-nine million servicemen and women.
There are a variety of positive features of the VA home loan program, including:
- No down payment in the vast majority of cases
- Limitations on closing cost amounts
- No monthly mortgage insurance premiums
- Low interest rates
- Spread out property taxes and homeowner's insurance
- You can have a poor credit rating and still qualify for a loan at a reasonable rate
No Down Payment
An extremely popular feature with VA loans is that in the majority of cases, no down payment is required. Down payments can be daunting for people who want to purchase a new home but don’t have cash to put down. The VA understands that service personnel may have been serving their country, thereby preventing them from saving up sufficient cash for a down payment on a home, and thereby put this feature into law. These days, lack of a down payment is not a deterrent for veterans using a VA loan since they don’t have to put any initial money down.
Closing Cost Limits
Closing costs on homes can run people thousands of dollars. With a VA loan, the Veterans Administration places a limitation on the amount the veteran has to incur in the closing costs. The exact amount varies depending on the VA loan itself, but in some cases, the seller is required to pay for the buyer’s closing costs in their entirety.
No Monthly Insurance Premiums
Most borrowers that have less than 20% equity in their home are required to purchase mortgage insurance, which can run a couple hundred dollars each month. In lieu of monthly insurance premiums, veterans pay a one-time funding fee under their VA loan. The funding fee is between .5% and 3.3%, and is based on mortgage type and any down payments made. The funding fee is generally rolled right into the VA loan itself.
Low Interest Rates
Many veterans, even those with poor credit, enjoy low interest rates on their homes with VA loans. Streamline refinancing and other VA loans also allow veterans to have fixed interest rates so they are not surprised with skyrocketing adjustable rate mortgage (ARM) payments.
In addition, fixed-rate VA loans put a portion of the monthly payment toward the principal balance of the loan instead of merely paying off the interest, as many conventional loans stipulate.
Property Tax and Homeowners Insurance Adjustments
VA loans allow their recipients to spread out their property taxes and homeowners insurance over a period of time, so they do not have to pay out a lump sum all at once. The taxes and homeowners insurance payments are added into the monthly VA loan payment.
Additional VA Loan Features
- the option to use a VA loan to refinance a current traditional mortgage
- early payoff with no penalization
The benefits of VA loans for veterans are many. Veterans who have fallen on hard times can refinance existing traditional or VA loans, new homeowners can purchase or build a home for their family and loved ones, and veterans can rely on extensive support from the VA to help prevent foreclosure or wildly fluctuating adjustable rate mortgages (ARMs). Millions of veterans have benefitted from the VA loan program. You should too.