VA Home Loans
A VA loan offers advantages over a non-VA loan that can save you bucks and make it more likely you will be approved.
No Down Payment
You often have no up-front, out-of-pocket expenses with the VA home loan. This is because a VA loan doesn't require a down payment and with VA loans the seller is allowed to pay the closing costs for you.
No Monthly Mortgage Insurance
Mortgage insurance can run $100 - $200 a month on a non-VA loan. But since the VA guarantees VA loans, you don't need mortgage insurance. You don't have to pay that extra money each month.
Low Interest Rate
VA loans often have lower interest rates than non-VA loans. On a $400,000 mortgage, this could lower payments $100 a month, maybe more.
No Out-of-Pocket Closing Costs
On a non-VA loan, you pay miscellaneous up-front fees, such as for processing or underwriting the loan. These fees can run around 3% of the loan amount—thousands of dollars. Most of the time on a VA Loan, you will not have to pay any out-of-pocket closing costs because the VA allows the seller to pay them for you.
No Prepay Penalty
For most non-VA loans (especially if you have less than stellar credit), if you pay the loan off early, which often happens if you refinance or sell the home, you pay a fee. Not with VA loans. You won't pay that fee.
With a VA loan, you can transfer your mortgage to someone else. They would assume your mortgage. This can help sell your home, especially if the interest rate on your mortgage is less than the current interest rate.
The VA assigns a VA-licensed appraiser to estimate the value of the home you want to buy. Appraisers are chosen at random. On a non-VA loan, the lender usually picks the appraiser, which could influence the appraiser to give an estimate that favors the lender—costing you money.
Adjustable-Rate & Fixed-Rate Loans
An adjustable-rate loan starts off at a slightly lower interest rate than a fixed-rate loan. Most often it stays at this rate for three, five or seven years. After that, the interest rate changes every year to the current interest rate.
A fixed-rate loan has an interest rate that, well … stays fixed. The interest rate at the time the loan is finalized is the interest rate for the life of the loan.
You choose which type of interest rate you want with a VA loan: adjustable or fixed.
Additional Benefits for Disabled Veterans
If you are 10% disabled or more, the VA waives the funding fee. Also, if you have a permanent and 100% service connected disability, you may be eligible for a $50,000 grant for adapting a home to accommodate your disability.
Cal-Vet & Tex-Vet Loans
If you’re buying a home in California, you may be eligible for a Cal-Vet home loan. Likewise, home buyers in Texas may be eligible for a Tex-Vet loan. But depending on your circumstances, a VA loan may be a better option.