A Veteran’s Affair (VA) Loan is known to be one of the best benefits for current and retired military members and their families. Let’s dive deeper into what makes the VA Loan so special.
A VA Loan is a home loan designed to help finance homes for veterans, eligible members of the military and some surviving spouses. To be eligible to apply for a VA Loan, a military member must serve 90 consecutive days on active duty during a time of war, 181 days during peacetime, or six years in the Selected Reserve or National Guard. A VA Loan is guaranteed by the government but made by qualified lenders such as banks or independent mortgage companies. Because the government guarantees the loan, lenders can approve borrowers with more flexible lending standards.
Loans Start at Zero Down
The VA Loan is one of the few loan programs available that does not require a down payment, allowing a more accessible entry to homeownership for military members and veterans. VA buyers are required to pay a funding fee at closing time, which ranges from 0.5–3.3% of the loan, depending on the veteran’s service and loan type. Unlike closing costs, which are an out-of-pocket expense, you can finance the VA funding fee and wrap it into your monthly mortgage payments. If you are retired or discharged on disability, you might be eligible to have your funding fee waived.
No Need to Pay Private Mortgage Insurance
One reason the VA Loan remains one of the best benefits available to service members and veterans is that borrowers are not required to pay costly private mortgage insurance, typically required when putting less than 20% down on a loan. Private mortgage insurance typically costs between 0.5–1% of the loan amount. That means on a $100,000 loan, you could pay as much as $83.33 per month in private mortgage insurance. Eliminating private mortgage insurance saves VA borrowers up to hundreds of dollars per month.
Competitive Rates and Flexible Credit Requirements
Typically, VA Loans have lower interest rates than conventional ones because the mortgage is backed by the government, making the loan less risky for lenders. The reduced risk also allows for more flexible credit requirements. So if your credit score is less than perfect, don’t panic. Plus, VA Loans are more forgiving when bouncing back after a bankruptcy, foreclosure or short sale.
Your BAH Could Cover Your Mortgage Payments
In many cases, your mortgage could be less expensive than the money you get from your BAH, so you could potentially end up with more money in your pocket by purchasing a home with a VA Loan. Additionally, if you’re an active duty military family receiving BAH, that money could count toward your qualifying income for a VA Loan, giving you more purchasing power. Of course, this will depend on where you live, your rank and years of service. It’s the only loan program that could cost you nothing upfront because you don’t have a down payment.
Sellers Can Pay Borrower Closing Costs
VA Loans allow the seller to pay closing costs, which further reduces the out-of-pocket costs for the buyer. This program is also the only loan program enabling your seller credit to pay down a credit balance, such as a credit card debt or car loan.
If you’re active duty, a reservist or retired military member looking to take advantage of the VA Loan benefit, contact one of our Mortgage Loan Originators. As a local lender, we’re here to guide you through the mortgage process from start to finish.
NMLS #29600. Contact 1st Priority Mortgage, Inc. for mortgage products and eligibility. 1st Priority Mortgage, Inc. is a Licensed Mortgage Banker, New York State Department of Financial Services—License number LMBC 107183, and the New Jersey Dept. of Banking & Insurance. For full licensing information, visit www.nmlsconsumeraccess.org
