Active members and veterans of the U.S. Armed Forces are eligible for a number of special financial programs. One of them is access to special programs designed to make it easier to become a homeowner.
The U.S. Department of Veterans Affairs doesn’t make loans directly, but it offers an array of financial perks to borrowers – perks that can save huge amounts of money on the homebuying process. VA housing programs are available to active duty service members and veterans, and also to certain eligible surviving spouses.
Here are just a few ways a VA loan can save you money.
1. You Can Buy a Home with No Money Down
A standard, 30-year mortgage loan typically requires a borrower to make a 20 percent down payment toward the purchase price. A VA loan requires no down payment.
2. They Are Less Expensive Than Conventional Loans
Because they carry reduced risk for lenders, interest rates are lower. The average cost of a 30-year fixed-rate VA loan was 4.63 percent during April of 2018, according to Ellie Mae, Inc., the mortgage processing company.
3. It’s Easier to Qualify
The VA guarantees a portion of a veteran's mortgage to make qualifying for loans with favorable terms easier. The entitlement, as the guarantee is called in industry jargon, is the dollar amount the VA promises to repay a lender in the event the borrower defaults. The basic, or primary, entitlement is currently $36,000, but there is more available for expensive homes in regions with a higher cost of living.
4. No Mortgage Insurance Required
Federal Housing Administration (FHA) loans and conventional loans with less than 20 percent down require private mortgage insurance, but VA loans do not. For a $318,500 house purchased with 3 percent down, the private mortgage insurance would be $337 a month. That’s a lot of money veterans don’t have to pay.
5. Low Closing Costs
There are limits on loan-related closing costs for buyers using VA loans. Sellers can pay all of the buyer’s costs and up to 4 percent in concessions.
6. No Early Payment Penalties
If you want to pay off your VA loan early and save on interest, there is no charge, as there is on some mortgages.
7. Aid to Those Facing Foreclosure
If a homeowner defaults on a VA loan, the VA has financial intervention programs available to help owners work with lenders and avoid foreclosure.