Mortgage Loans provided by the Department of Veteran Affairs offer a number of special advantages when compared to private loans and FHA mortgage loans. If you are eligible for a VA loan, there are strong reasons to go for one.
Benefits of VA Mortgage Loans
Lack of Initial Down Payment: VA loans are the only mortgage loans which allow for 100% financing of the cost of the house – i.e. you can get a loan without any initial down payment whatsoever.
No Need for Mortgage Insurance: With a normal mortgage loan, you need an initial down payment of 20% of the house value, to stop paying for the mortgage insurance. In the case of VA loans, no such insurance is required, ince the US government backs these loans. Because of this government backing (which promises the lender a certain amount even if the borrower defaults on the loan), enders can afford to offer these loans with very attractive terms.
Zero Prepayment Penalties: Many mortgage loans come with prepayment penalties, but VA loans do not come with any such restrictions. So you are free to sell your home or repay the loan within any time period.
Large Number of Loan Options: There are a large number of VA loan types offered. No matter the type of house you plan on buying (condo, duplex, new home), you can get a VA loan to finance it. Both ARM and fixed rate loans are available for VA loans.
Low Closing Costs: Compared to traditional mortgage loans, the closing costs are quite low. This is because the Department of Veteran Affairs limits the closing costs a lender can charge applicants; the additional savings can be invested elsewhere.
Easy Qualification: Like other mortgage loans, VA loans require proof of sufficient income to make the monthly payments, a good credit score, and other documentation. But the guidelines are highly flexible – as long as you meet the general requirements you can usually get funding.
VA Loans are Assumable Loans: This means that if you plan on selling your house in the future, you can also transfer the mortgage loan along with it to the new buyer as long as he or she is also VA eligible.
Ability to Compare: VA loans are not offered by the government directly. Instead, they are offered by banks, private lenders, unions etc. Because of this, the rates differ depending on the lender. So you have the option of searching around and comparing different rates before selecting the best one.
The many benefits of VA loans, make them highly affordable. So if you are an active duty military person or a veteran (some other groups are also eligible for VA Loans), consider a VA mortgage loan when you are in the market for a new house.