What is a VA Loan?
In 1944, the U.S. government created a military loan guaranty program to help returning service members purchase homes. The result, the VA Loan, is a mortgage loan issued by approved lenders such as Veterans United Home Loans and guaranteed by the federal government. Since its inception, the VA Loan program has helped place more than 20 million veterans and their families into an affordable home financing situation through its distinct advantages over traditional mortgages.
Today, the VA Home Loan program is more important than ever to service members. In recent years, lenders nationwide have tightened their lending requirements in the wake of the housing market collapse, making the VA Loan a lifeline for military homebuyers, many of whom find difficulty when faced with tough credit standards and down payment requirements.
VA Loan vs. Traditional Mortgages
Military homebuyers have access to one of the most unique and powerful loan programs ever created. See how the VA Loan compares to a traditional home mortgage:
| VA Loans | Conventional Loans |
|---|---|
| 0% Down(for qualified borrowers)VA Loans are among the last 0% down home loans available on the market today. | Up to 20% DownConventional loans generally require down payments that can reach up to 20% to secure a home loan, pushing them out of reach for many homebuyers. |
| No PMISince VA Loans are government backed, banks do not require you to buy Private Mortgage Insurance. | PMI RequiredPrivate Mortgage Insurance is a requirement for borrowers who finance more than 80% of their home’s value, tacking on additional monthly expenses. |
| Competitive Interest RatesThe VA guaranty gives lenders a greater degree of safety and flexibility, which typically means a more competitive rate than non-VA loans. | Increased Risk for LendersWithout government backing, banks are taking on more risk which, in turn, can result in a less-competitive interest rate on your home loan. |
| Easier to QualifyBecause the loan is backed by the government, banks assume less risk and have less stringent qualification standards for VA Loans, making them easier to obtain. | Standard Qualification ProceduresConventional options hold stricter qualification procedures that can put homeownership out of reach for some homebuyers. |
Loan Limits
In most parts of the country, veterans who qualify for the VA Loan can purchase a home worth up to $417,000 without putting any money down; however, with the 2013 VA Loan Limits, borrowers in high-cost counties may be able to purchase homes far exceeding that amount without a down payment. To find out the VA Loan Limit in your area, contact one of our recommended lenders.
Additional Benefits
Basic Allowance for Housing
Basic Allowance for Housing (BAH) is a significant benefit for qualified active military members. Lenders can count your Basic Allowance for Housing as effective income, which means you can use BAH to pay some or all of your monthly mortgage costs.
BAH varies based on your pay grade, your geographic location and your number of dependents. Learn more about Basic Allowance for Housing.
No Pre-Payment Penalty
With many different types of loans, paying off a home loan before it matures results in a pre-payment penalty. This is because lenders miss out on additional opportunities to collect interest payments. The pre-payment penalty is a way for financial institutions to recoup some of that money.
The VA Loan allows borrowers to pay off their home loan at any point without having to worry about a pre-payment penalty. With the absence of a pre-payment penalty, borrowers are free to consider future home purchases and refinancing options.
Originally Shared on https://www.veteransunited.com/network/
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