A VA loan is a type of mortgage the US Department of Veterans Affairs gives out. The idea behind a VA loan is to help veterans get loans, so they can buy homes or pay off debts faster. There are many benefits to taking out a VA loan. Below are some of the little-known facts about VA Loans you should know.
Lower Down Payments
The VA loan requires a 3.5% down payment. This is lower than many conventional loans, which require at least 20% down to avoid higher interest rates. To qualify for a VA loan, you’ll need to prove that your credit score was at least 680 (which is not too high) at the time of the application. You may also need proof that you have saved enough money for your down payment and closing costs.
Lower Closing Costs
VA loans typically come with lower closing costs than conventional loans, saving borrowers thousands of dollars in fees. According to Home Buyer, a mortgage typically costs $1,297 per month, and if you were buying a $250,000 house using a conventional mortgage today, you would pay around $12,500 in closing costs alone! With the VA program, however, you could pay only about $6,000-$7,000 in closing costs — including all fees associated with your loan.
Funding Fee Waivers
To cover program costs and make house ownership affordable for future Veterans, VA normally levies a funding fee. Depending on the loan type and service history, the cost ranges from 0.50 percent to 3.3 percent of the loan amount. However, this funding is not paid for by everyone. Veterans with disabilities receive benefits for a disability gained while they exclude service from paying such fees.
Use Your Benefits Continuously
Your VA mortgage advantage is not temporary. It is available for as many uses as you like. For example, if you use a VA loan to buy a house, and after some time, you decide you need a bigger place. You can use your benefits to purchase a new home after selling your old one and paying off the VA loan.
In conclusion, a VA loan can be a cost-friendly loan you can get to finance your existing home or to buy a new one. However, be sure to carry out thorough research before deciding on your VA loan.