There are several reasons you should use your VA benefit to buy a home. Veterans and military families all over the country are taking advantage of the huge savings that a VA loan brings, and we want to tell you why.
In many cases, buying a home using a VA loan is opening doors for families who might have otherwise been unable to qualify. So what is it about the VA loan that helps these families get into homes?
1. The VA loan program does not require a down payment
Unlike conventional loans and nearly all other home mortgage programs, the VA loan does not require the borrower to pay any money down. This means that you can finance up to 100 percent of the value of the home. Other loans require you to pay a certain portion of the value of the home, and if you don’t reach the required down payment, there’s private mortgage insurance.
2. The VA loan program does not require private mortgage insurance
With a conventional loan, if you don’t put down 20 percent of the home value, then you will usually be required to pay a monthly private mortgage insurance (PMI). Many veterans and military families struggle to build the required savings to avoid PMI, but with a VA loan, there is no PMI.
PMI is an insurance that helps cover loss for the lender if the borrower defaults on the loan. The reason VA loans do not require PMI is because the VA actually guarantees to the lender up to 20 percent of the value of the home in the case that a Veteran defaults. So all the money (usually between $115-300 monthly) you would be spending on PMI is actually chiseling away at your loan balance instead of protecting the lender.
3. The VA loan program allows for extremely competitive interest rates
Because the VA backs your loan with a guarantee to the lender, the lender can offer Veterans lower interest rates. This is because the lender is assuming less risk when they lend to you. In general, a borrowing Veteran or qualified VA benefit recipient will get a .5 to 1 percent reduction in interest rate compared to if they would have gone with a conventional loan.
Using your VA benefit to secure a VA loan can add up to thousands of dollars over the life of the loan. Military families all over the country are enjoying this mortgage lending program and you can too, just call your VA loan specialist and they’ll help you get started.