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Posted February 8, 2015
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VA Mortgage Rates
There are multiple loan "programs" for today's active home buyers. Some of these programs are backed by the U.S. government and others are backed by specific lenders.
There is a "right program" for every mortgage borrower, but one loan type stands apart for its combination of low rates, aggressive underwriting ,and secondary benefits.
That program is the VA loan from the Department of Veterans Affairs. VA loans are a key part of today's housing market. Plus, VA mortgage rates are the lowest among all common loan types.
VA Loan. Better Than FHA And Conventional?
Backed by the U.S. Department of Veterans Affairs, VA loans are designed to help active-duty military personnel, veterans and certain other groups become homeowners at an affordable cost. The VA loan asks for no down payment, requires no mortgage insurance, allows flexible guidelines for qualification among its many other advantages.
Here's an overview of the 10 biggest benefits of a VA home loan.
1. No Downpayment
Most home loan programs require you to make at least a small downpayment to buy a home. The VA home loan is an exception. Rather than paying 5, 10, 20 percent or more of the home's purchase price upfront in cash, with a VA loan you can finance up to 100 percent of the purchase price. The VA loan is a true no-money-down opportunity.
2. No Mortgage Insurance
Typically, lenders require you to pay for mortgage insurance if you make a downpayment that's less than 20 percent. This insurance, referred to as private mortgage insurance (PMI) for a conventional loan or a mortgage insurance premium (MIP) for an FHA loan. protects the lender in the event that you default on your loan. But a VA loan neither a no down payment nor mortgage insurance. That makes this a VA-backed mortgage very affordable upfront and over time.
3. U.S. Government Guarantee
There's a reason why the VA loan comes with such favorable terms. The federal government guarantees that a portion of the loan will be repaid to the lender even if you're unable to make monthly payments for whatever reason. This guarantee encourages and enables lenders to offer VA loans with exceptionally attractive terms to borrowers that want them.
4. Ability To Shop and Compare
VA loans are neither originated nor funded by the VA. Furthermore, mortgage rates for VA loans aren't set by the VA itself. Instead, VA loans are offered by U.S. banks, savings-and-loans institutions, credit unions and mortgage lenders -- each of which sets its own VA loan rates and fees. This means you can shop around and compare loan offers and still choose the VA loan that works best for your budget.
5. No Prepayment Penalty
A VA loan won't restrict your right to sell your home if you decide you no longer want to own it. There’s no prepayment penalty or early-exit fee no matter within what time frame you decide to sell your home. Furthermore, there are no restrictions regarding a refinance of your VA
loan. You can refinance your existing VA loan into another VA loan via the agency's Interest Rate Reduction Refinance Loan (IRRRL) program or switch into a non-VA loan at any time.
6. Loan Options
A VA loan can have a fixed rate or an adjustable rate. It can be used to buy a house, condo, new-built home, manufactured home, duplex or other types of properties. Or it can be used to refinance your existing mortgage, make repairs or improvement to your home or even make your home more energy efficient. The choices are yours. A VA-approved lender can help you decide.
7. Easy To Qualify
Like all mortgage types, VA loans require specific documentation, an acceptable credit history and sufficient income to make your monthly payments. But, as compared to other loan programs, VA loan guidelines tend to be more flexible. This is made possible because of the VA loan guaranty. The Department of Veterans Affairs genuinely wants to make it easier for you to buy a home or refinance.
8. Lower Closing Costs
The VA limits the closing costs lenders can charge to VA loan applicants. This is another way that a VA loan can be more affordable than other types of loans. Money saved can be used for furniture, moving costs, home improvements or anything else.
9. Funding Fee Flexibility
VA loans require a "funding fee", an upfront cost based on your loan amount, your type of eligible service, your down payment size plus other factors. Funding fees don't need to be paid as cash, though. The VA allows it to be financed with the loan, so nothing is due at closing. And not all VA borrowers will pay it. VA funding fees are normally waived for veterans who receive VA disability compensation and for unmarried surviving spouses of veterans who died in service or as a result of a service-connected disability.
10. Assumable Financing
Most VA loans are "assumable," which means you can transfer your VA loan to a future home buyer if that person is also VA-eligible. Assumable loans can be a huge benefit when you sell your home -- especially in a rising mortgage rate environment. If your home loan has today's low rate and market rates rise in the future, the assumption features of your VA become even more valuable.
Get A Complimentary VA Rate Quote
The eligibility list for a VA loan is long. Classes and classes of servicepersons and their families are eligible.
Whether you're an active-duty serviceperson, a veteran, a member of the National Guard, a Reservist or surviving spouse of a veteran; or if you're a cadet at the U.S. Military, Air Force or Coast Guard Academy, midshipman at the U.S. Naval Academy or officer at the National Oceanic & Atmospheric Administration, you may be eligible for a VA loan -- plus all the benefits that come with it.
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.