The VA Home Loan Process: 4 Things Every Buyer Must Know
With home mortgage interest rates still very low, today's home buyers have many excellent home loan options available to them. But for those who meet the military service qualifications, the VA home loan option continues to provide a very affordable path to home ownership. If you are shopping for a home and wondering which mortgage you should choose, here are four important facts about the VA home loan program that will help you decide if it is the right choice for your buying situation.
VA Home Loans are a Zero Down Mortgage Option
Designed to make becoming a Clearwater homeowner as easy as possible for qualifying service members and their families, the VA home loan does not require a down payment. Although there are other types of home loans that can be obtained with no or a very low down payment, VA home loans are unique in that they do not require a prime mortgage interest payment (PMI) to offset the lack of equity. Since PMI can tack hundreds of dollars onto the monthly mortgage payment, this savings can be extremely beneficial to home buyers who need to keep costs down.
VA Home Loans Provide a Low Interest Mortgage Option
Many types of mortgages charge higher interest rates when less than twenty percent of the purchase price is paid up front as a down payment or the loan is considered to be higher risk, due to factors associated with the property or the borrower.
In contrast, the interest rate on a VA home loan is typically less than the rate on conventional loans, as well as some other federally guaranteed home loans, such as an FHA home loan, even when buyer credit scores are less than optimal.
There are, however, some additional fees associated with VA mortgages, that must be considered to determine just how much more affordable this type of home loan can be. These include an upfront funding fee of between 1.25 and 3.3 percent of the total loan amount. Since many other types of home loans, including conventional mortgages, often include varying amounts of lender fees, prospective applicants should always compare all aspects of any loan they are considering before making a final decision.
VA Home Loans are an Assumable Mortgage
Although most prospective buyers may be focused only on their present housing needs, the truth is that, as a nation, Americans move frequently. In fact, current statistics show that, on average, most households will move more than eleven times over their lifetime so being able to sell the current home quickly is an important factor. Since VA home loans are completely assumable by qualified buyers, homes financed with them may be easier to sell in the future, especially during periods when home loan interest rates are surging or when buyers have difficulty qualifying for an affordable conventional home loan.
VA Home Loans Help Buyers Close With Fewer Out-of-Pocket Costs
Closing costs on conventional and other types of home loans can be a hefty amount - and difficult for cash-strapped buyers to afford. Because VA home loans were specifically designed to make becoming a homeowner easier for those who have served their country, they offer lower closing costs. For example, standard underwriting and loan processing fees are not allowed, as well as some other types of fees and charges. In addition, VA home buyers are able to ask sellers to pay their closings costs or opt to finance them into their total loan amount, if the seller refuses to do so.
Since not all homes can pass the mandatory VA appraisal and inspection process, prospective buyers who want to consider a VA home loan should always discuss their needs carefully with their real estate professional before beginning their home search.