Advantages Of A Va Home Loan

There are many advantages of a VA home loan. One of them is easier loan requirements. The first and foremost va loan requirement you must meet is being in the military. You need proof of your military duty by obtaining a Certificate of Eligibility.

A Certificate of Eligibility is not difficult to obtain. You just need to contact your local VA office to get the appropriate form and get the process started.

Here is a list of some of the advantages of a VA Home Loan:

Most cases do not require a down payment.
You may be able to get up to 100% financing. However there are some maximum loan limits that may apply depending of location and secondary market requirements.
Can negotiate your interest rates.
No private mortgage insurance (PMI) to pay.
Limits set on your closing costs.
Choice of repayment plans on thirty year loans like GPM (Graduated Payment Mortgage) and GEMs (Growing Equity Mortgages).
An assumable mortgage depending on VA approval of the person assuming the mortgage's credit.
No prepayment penalty.

Let me explain a couple of the repayment choices:

Graduated Payment Mortgage (GPM)

This a payment choice where the payment starts out low and goes up over time. Which can be nice in the beginning. But your payment will go up at the scheduled intervalsb. You are made aware of this in the beginning so there is no surprise. Why would someone make this repayment choice? Perhaps you are aware that your income will go up over time to afford the home you want but you need a lower payment right now. This repayment choice could be very helpful depending of the specific situation.

Growing Equity Mortgages (GEMs)

GEMs have a fixed interest rate which is lower than most rates. The reason for this is the payments will go up over time. The payments go up gradually with the increase being monthly or annually. With these regular increases, more of your payment goes down on the balance. This allows you to pay off your VA mortgage in 15 to 20 years instead of 30 years.

You can see the advantage of that right away. How can this option be helpful? You can pay off your mortgage quickly, however, you should not choose this option if you are not in a career that will offer you future promotions. Remember the payments go up. So if your income does not go up, this can be a hardship. So you need to evaluate your career possibilities before you choose this option. If you are already settled in a career with not many promotions likely, this is not a good idea.

Disadvantage of a VA Home Loan

Just consider the savings on no down payment and no private mortgage insurance! That alone makes a VA mortgage worth it for any veteran. But there are some fees you should consider. For example, there is a funding fee. This is usually 2% paid to the VA by all veterans except certain exempt ones. Choosing to pay a down payment can reduce this fee. A 5% down payment can reduce the fee to 1.5%. A 10% down payment can reduce the fee to 1.25%. So you will have to weigh this fee in deciding if this loan product is a good deal for you or not.

Do not let this fee startle you. Other loan products have from 3.5% all the way up to 20% down payment requirements. So this 2% fee is not much when consider the other options.

If you are in the Reserve or the National Guard, this fee is 2.75%. But once again with a down payment of 5% the fee drops to 2.25%. If you can afford a 10% down payment, the fee drops to 2%.

If you have used your entitlement once already, be prepared to pay a fee of 3%.

Of course you will have the usual closing costs to pay on your new VA mortgage. These costs apply to any other mortgage you would qualify for. They include things like credit reports, loan origination fees, survey, recording fees, title insurance, etc.

As you can see, advantages of a VA home loan far outweigh the disadvantages. So if you are a veteran, make sure you take a close look at this option. Before you know it, you will have that home of your dreams.

About the Author:
Jeffrey Ragan has several years of experience helping people reach their goals and wants to help you learn more about the VA Home Loan and other helpful information on their website, First-Time-Home-Buyer-Solutions.com.

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