No Down Payment Potential
With ample entitlement, qualified Veterans who’ve earned the VA loan benefit can enjoy the advantages of a no-down payment home loan. With the increase in average home price in recent years, saving enough for a down payment is the largest obstacle for many hopeful homebuyers. The VA loan benefit can help leapfrog that obstacle. And getting into a home without a lot of cash out of pocket can provide flexibility to even those buyers who could otherwise afford a down payment.
No Monthly Mortgage Insurance Premiums
VA loans have many advantages over other mortgage programs. One is that private mortgage insurance (PMI) is never allowed. PMI, which can be charged on conventional and some other home loans, can add up to hundreds of dollars each month and thousands each year. VA loan holders never have to worry about this; although they may need to pay a VA Funding Fee.
Minimal Closing Costs
VA loans are unique in that they can be obtained with little or no cash from the borrower. The VA limits the types of closing costs that can be charged. Additionally, the VA allows Veterans to roll in certain fees, and ask for seller-paid closing costs and concessions. So, it’s possible for a Veteran to obtain a zero-out-of-pocket VA loan.
Competitive Interest Rates
VA loan rates are competitive when compared to rates for conventional and FHA mortgages.
No Prepayment Penalty
The VA prohibits prepayment penalties. This means that you can pay down your loan principal or even pay off your entire mortgage early at will, without a penalty. Putting extra cash toward principal can save you money on the total interest you pay on your loan long term.
Multiple Refinancing Choices
Essentially, there are two types of VA refinance loans: the VA streamline refinance loan (IRRRL), and the cash-out loan. A streamline can be used if you already have a VA loan, and you want to reduce your interest rate or monthly payment, or want to switch from an adjustable rate to a fixed rate. A VA cash-out loan can be used refinance from a VA or other type of mortgage, and can provide the opportunity to consolidate debt or to get cash out of your home’s equity to pay for expenses.
More Than One VA Loan
It’s a little-known fact that Veterans may have more than one VA loan at a time. It doesn’t happen often, but it is possible if you have ample entitlement. One VA loan could take up some, but not all, of your entitlement. If you have enough entitlement left over, it’s possible to have two VA loans at once. This begs the question of whether you can rent out a home financed with a VA loan. Due to owner-occupancy requirements, VA loans are not meant as a way to buy single-family homes as income properties. But it can be possible to rent out a home that you used as your former primary residence, even if you are still paying on the VA loan.
VA Loan Assumption
The VA allows the practice of assuming someone else’s VA mortgage or of having your own VA loan assumed by an eligible borrower. Often the reason for a VA loan assumption is to take advantage of an existing loan’s interest rate. Assuming a VA loan can also help out both the buyer and seller, and save money in fees. Not all lenders offer this option.
Foreclosure Avoidance Advocacy
For Veterans who find themselves financially strapped and unable to make their VA loan payments, the VA has mortgage counselors on staff to assist distressed borrowers with alternatives to foreclosure.
