No Down Payment Requirement
As long as the purchase price doesn’t exceed the appraised value and VA county limits, a down payment isn’t necessary to qualify for a VA loan. Since saving money and building credit can be difficult for service members who are constantly on the move, this is one of the best VA loan benefits for many veterans. Since qualified borrowers can finance 100% of the home’s value without putting anything down**, this VA loan benefit can save veterans and active-duty service members up to 20 percent of the loan value when compared to conventional loans. You’ll be able to borrow 100 percent of the equity in your home, making owning a home more attainable than ever before. Plus, veterans can use their VA entitlement more than once, as long as the loan is paid in full each time.
No Private Mortgage Insurance
If you’ve been researching mortgage loans, you’ve likely read about private mortgage insurance. Also referred to as PMI, private mortgage insurance is intended to protect lenders in case of a borrower default. Although it’s required by most conventional lenders, those who put down at least 20 percent can avoid having to pay PMI. Unfortunately, this is a tough task for many people including veterans. Fortunately, VA loans don’t require PMI. Why? Since the federal government backs all VA loans, they assume the risk on behalf of the borrower. Since this “risk” is covered, lenders don’t have to worry about protecting themselves with PMI. Depending on the loan amount, this benefit of VA loans can translate into hundreds of dollars saved each month. There is however a one-time VA funding fee which goes directly to the VA to help support the program and future generations. The VA Funding Fee usually ends up costing less than private mortgage insurance over time and it can also be financed into the loan, saving you from extra out of pocket expenses.
Greater Credit Score Leniency
When it comes to credit scores, VA loan programs tend to be more flexible with their guidelines. While conventional loans may deny a loan based on a low credit score, the VA program typically looks at the previous 12 months of credit history and credit scores as low as 580. Reasons for not qualifying could be a bankruptcy, tax lien, or a collections situation as part of your past. Just because you have a lower credit score now doesn’t necessarily mean you won’t be eligible for a VA loan. A HomeBridge Mortgage Loan Originator can help you determine your eligibility and help guide you on the best loan for you.
Competitive Interest Rates
As a potential homeowner, you want to find an interest rate that’s as competitive as possible, as lower interest rates can save you thousands of dollars in the long run. Since the VA backs each loan with a guarantee, financial institutions automatically carry less risk. As a result, they can offer competitive interest rates below conventional interest rates. When you pair lower interest rates with the fact that you won’t need to make a down payment* or pay for private mortgage insurance,¹ it’s plain to see that the savings start adding up significantly. Plus, when it comes time to refinance your VA loan, you can refinance within the VA program to a lower rate without having to re-qualify for a VA loan, this is called an Interest Rate Reduction Refinance Loan (IRRRL).***
Speak to a HomeBridge Mortgage Loan Originator for more details about VA Loans and using your VA entitlement benefits.
*100% financing up to county loan limits may be available for purchase loans or 1-unit cash-out refinances. Cash-out not available in Texas. Minimum FICO score requirements apply.
**On 1-unit primary residences up to the county loan limits. Also a 25% guarantee must be met with equity if over the county loan limit.
***In addition to having a current VA loan, there are several other requirements such as past on-time payments, at least 7 months since your first payment on your current VA loan and the IRRRL must put the borrower in a better financial position. Other requirements may also apply.
¹Most VA loans will require a funding fee.