What is a veterans mortgage loan?
If you are in the market for a home loan, and are an eligible veteran or active duty military person then you should strongly consider the Veterans mortgage loan as your 1st choice for mortgage financing. A Veterans mortgage loan offers numerous benefits over a conventional loan.
Consider the following:
Although there are some $0 down-payment conventional loan programs available, the interest rate on these conventional programs is higher and the programs are credit score based.
With a Veterans mortgage loan you can buy a home with zero down-payment for up to $417,000(and even more in some areas where housing prices are above the national average). With an average down-payment of 5% -20% required for conventional loans, a veterans mortgage loan proves much easier on the wallet. And because eligibility for a Veterans mortgage loan is not based on your credit score, you get the same low rate whether you are making a 5% down-payment or no down-payment at all.
Conforming conventional loans require you to have mortgage insurance if you are making less than a 20% down-payment.
But a veterans mortgage loan does not require you to have mortgage insurance ever. When comparing the two remember that with a veterans mortgage loan you save hundreds each month in mortgage insurance premiums.
If your credit has been damaged in the past you are likely to get a lower rate with a Veterans mortgage loan than with a conventional loan.
Because the VA offers up a 25% guarantee on a veterans mortgage loan, and does not have minimum credit requirements, lenders are more willing to gamble on a veteran borrower who doesn’t meet their ideal credit profile. Once again a Veterans mortgage loan offers options where they would not exist with a conventional loan.
There is no prepayment penalty on a Veterans mortgage loan.This is very important for active duty military families who move with regular frequency. Because a Veterans mortgage loan has no prepayment penalty, borrowers have greater flexibility when they need it, not when the lender says they can have it, meaning that you can refinance or sell your home at any time without having to pay a penalty. Your debt ratio is a crucial factor in the loan qualification decision.During the qualification process the lender assesses your ability to repay the veterans mortgage loan. Perhaps one of the more overlooked aspects of a Veterans mortgage loan is that they allow you to have a higher debt ratio than conventional loans. The debt ratio is used to evaluate the amount of payment responsibilities that you have outside of your housing costs. For most conventional loans you must have a debt ratio below 36%. Again because of the guarantee offer by the VA, It will be easier to qualify for a Veterans mortgage loan if your debt ratio exceeds the standard 36%. A conventional loan only allows the seller to pay your closing cost up to 3% of the loan amount.However, with a Veterans mortgage loan the seller is allowed to pay all of your closing cost up to 6% of the loan amount. This means that because of the ability to finance out to 100% with a Veterans mortgage loan, in some cases a home can be purchased with zero out of pocket expenses. Imagine not being responsible for paying a single penny at the closing table to move into your new home. With a Veterans mortgage loan you can! With interest rates currently at all time lows there has never been a better time to get your Veterans mortgage loan.Interest rates on a Veterans mortgage loan track very similarly with their conventional cousins and in some cases can be found even lower. Currently a Veterans mortgage loan is the only type of loan that allows you to drop your interest rate without having to go through an appraisal.Once you have a Veterans mortgage loan you can use a streamline program to refinance to a lower interest rate and save on the monthly payments. And should rates improve significantly again you can do a streamline refinance of the Veterans mortgage loan again with no cash out of pocket at closing. |
With a “cash-out” refinance of the Veterans mortgage loan those who might not be eligible for a traditional home improvement loan, now can make those long needed home improvements.If you have equity in your home you can do a “cash-out” refinance of your Veterans mortgage loan and take out equity (up to 90% in most cases) to consolidate debts and make improvements to the home. This is a great option for a borrower who has lots of equity in their home, but may not have perfect credit. A Veterans mortgage loan can be either a fixed rate or a Hybrid ARM. With the flexibility afforded with a Veterans mortgage loan borrowers are better able to choose the program that is right for them.Perhaps you are buying your dream home. A low fixed rate for either 15 or 30 years is the answer for you. Maybe your duty station requires a 5 year stay. A 5/1 Hybrid ARM suits your situation perfectly. Should you be planning to move from your home in 3 years a 3/1 Hybrid ARM is the solution. Whatever the situation a Veterans mortgage loan has flexible options to suit the needs of today’s eligible veterans. Most people don’t realize that a Veterans mortgage loan can be passed from one eligible party to another.That is to say a Veterans mortgage loan is assumable. This helps in a few ways. First a great interest rate can be preserved. If current interest rates are high and the Veterans mortgage loan in question was taken out during a period of very low rates, a subsequent buyer can assume the payments at the much lower rate (provided they are eligible for a Veterans mortgage loan). Second, a home that is under a Veterans mortgage loan can be passed down to subsequent generations. This is a great thing for many service men and women whose parents also served faithfully in the armed forces. |
