VA Loans

1st Time Buyer and the Benefit of Using VA Home Loan

By DAVE HOLLAND

VA Home Loan, What are they?

VA Loans and the Benefit for the First Time Home Buyer

Most first-time homebuyers struggle to come up with a down payment. For example, a $200,000 home will require nothing less than $6,000 down up front. For those trying to avoid mortgage insurance due to its cost, they will have to come up with $40,000. However, it is not all gloom and doom thanks to VA loans. 

VA loans offer service members a far cheaper option to own a home. This route does not require mortgage insurance, down payments, or high interest rates. This guide will offer quality information regarding what VA loans are all about. It will explore its benefits and highlight the requirements for eligibility. 

VA Loans: What are they?

VA loans are mortgages insured or backed by the U.S. Department of Veteran Affairs. These loans are designed specifically to help veterans, active-duty military personnel, and other selected groups to become homeowners without breaking the bank. This arrangement guarantees the protection of lenders, especially if they fall behind on their mortgages. In such a situation, the VA would help lenders cut their losses by compensating them. VA’s backing has given lenders the nerve to take more risks when issuing loans. 

Therefore, they do not have to be too careful when dealing with borrowers with lower credit scores. They know that they have a backup option in case things go awry. VA loans have also made it possible for lenders to forgo down payments and offer low-interest rates in their operations. So, first-time homebuyers and any other eligible people do not need mortgage insurance and a down payment. This arrangement has lenient rules. So, it is not shocking that more people are leveraging it to become homeowners. 

“VA loans offer service members a far cheaper option to own a home. This route does not require mortgage insurance, down payments, or high interest rates.”

Benefits of Using VA Home Loans for First-Time Buyers

Eligible first-time homebuyers have a lot of benefits they stand to enjoy by leveraging VA loans. For the scope of this guide, ten of these advantages will be highlighted. 

VA Loans – No Down Payment

The first benefit of taking advantage of VA loans is that there is no requirement for a down payment. VA home loan is an exception and unique because most home loan programs require at least some part of the money before an individual can purchase a home. 

Instead of demanding that a potential homebuyer pay five or ten percent of the sale price upfront, a VA loan can cater for up to one hundred percent of the purchase price! Indeed, the VA loans are a real no-money-down home mortgage opportunity that is putting smiles on the face of many people.

Does not Require Mortgage Insurance

Ideally, lenders require potential borrowers to pay for mortgage insurance if they pay a down payment that is not up to twenty percent. This insurance fee is known as private mortgage insurance (PMI). It is often required for a conventional loan and a mortgage insurance premium (MIP) for an FHA loan. 

It is needed to protect the lender in case the borrower defaults. However, VA loans do not require a down payment. So, there is no need for mortgage insurance. This difference makes this arrangement affordable upfront and in the long run. 

“The first benefit of taking advantage of VA loans is that there is no requirement for a down payment. ”

It Offers a Variety of Options for VA Loans

Though VA loans are guaranteed by the government, they are not generated or funded by the VA. They are direct loans originated by financial institutions such as banks, credit unions, savings-and-loans institutions, and mortgage lenders. 

Also, the VA does not specify the interest rate that can be offered to borrowers. It is left to financial institutions to determine their interest rate. So, borrowers have the ability to choose the lender that offers the most attractive interest rate that suits their needs. 

It is Backed up by the Government

The reason VA loans have such favorable terms is that it is not profit-oriented. It is a government-guaranteed program, which makes it possible for lenders to be repaid in the case of defaulting borrowers. 

Therefore, lenders can offer exceptionally attractive terms. They know that the government will compensate them in case borrowers are unable to meet up with their monthly payments. Government assistance is the reason lenders do not demand down payments. 

VA Loans do not Attract a Prepayment Penalty

Unlike regular loans, a VA loan permits borrowers to sell the property midway through their loan term. They will not be subjected to an early exit fee or a prepayment penalty regardless of the time frame they choose to sell their homes. 

Moreover, VA loans do not have restrictions regarding the refinancing of the loan. It is possible to refinance an existing VA loan into another one through the agency’s Interest Rate Reduction Refinance Loan (IRRRL) arrangement. The individual can also switch to a non-VA loan at any point in time. 

“VA loans do not have restrictions regarding the refinancing of the loan. It is possible to refinance an existing VA loan into another one .”

The Rate for VA Loans can be Fixed or Adjustable

Another option VA loans offer borrowers are choosing between adjustable and fixed rates. Besides, a VA loan can be used to purchase a condo, house, duplex, manufactured home, new built-home, or other types of properties.

 It can also be used to make repairs or improvements to a home, refinance an existing mortgage, or make a home more energy-efficient. It all depends on what the borrower wants. It is also in the best interest of an individual to make the decision alongside a VA-approved lender. 

It is not Challenging to Qualify for Va Loans

One of the reasons many people apply for VA loans is that it is easy to be eligible for them. Indeed, like regular loans, they require specific documentation, sufficient income to make monthly payments, and reasonable credit history. 

Nonetheless, VA loan guidelines are more flexible in comparison to other loan programs. This lack of rigidity is primarily because of the VA loan guaranty. These loans are specifically designed to make things easier for veterans, military members, and qualifying military spouses to refinance or buy a home. 

The VA Loans Closing Costs are Cheaper 

In comparison to other loan programs, VA loan closing costs are lower. The VA restricts the closing costs chargeable by lenders. So, the applicants can be sure that they will not pay as much as they would have paid when applying for regular loans.

This arrangement is one of the ways to ensure that the people that are meant to enjoy these loans are not denied the opportunity to have access to them. Borrowers will be able to use the money saved for other purposes such as the purchase of furniture, home improvements, moving costs, and other things. 

“One of the reasons many people apply for VA loans is that it is easy to be eligible for them.”

It can be Transferred to a Future Home Buyer

These loans are “assumable.” In other words, they can be transferred to future home buyers that are VA-eligible. Assumable loans offer fantastic perks when selling a home, especially in an environment with a rising mortgage rate. If the market rises, VA loans become even more valuable for those that want to sell their homes. 

It Offers Funding Fee Flexibility

VA loans require an upfront cost depending on the type of eligible service, loan amount, down payment size, and other factors. This money is called a “funding fee.” However, it does not have to be paid in cash. Instead, it can be financed with a loan.

So, nothing is due at closing. Besides, not all VA borrowers will be required to pay it. It is usually waived for veterans who are entitled to VA disability compensation. Unmarried surviving spouses of veterans who died while serving can also enjoy this benefit. 

Eligibility Criteria for VA Home Loans

Typically, lenders are usually careful when dealing with first-time homebuyers because they usually lack strong credit history. Therefore, they are often denied access to loans because they are not eligible. In some cases, they are priced out of their dream home because they cannot afford the interest rate. However, VA loans offer an escape route for such individuals because it is government-backed. 

Nonetheless, it is not everyone that is qualified for this opportunity. For example, veterans with service-related disabilities and surviving spouses are not eligible for VA loans. Other categories of ineligible individuals include:

• Service members on active duty who have been awarded the Purple Heart on or before the date of loan closing. 
• Veterans enjoying VA compensation for service-related disabilities.
• Surviving spouses of veterans who lost their lives due to service-connected disabilities or while in active service. 
• Veterans who are qualified to receive VA compensation for service-related disabilities but have opted for active service pay or retirement pay instead. 

For eligible candidates, especially military members, leveraging this loan is a smart way to make the experience of owning a home for the first time easier. 

“One of the reasons many people apply for VA loans is that it is easy to be eligible for them.”

Final Words

The days of being handicapped by the inability to provide down payments, mortgage loans, and high interests when buying a home are over. VA loans have eliminated most of the limiting factors that used to make homeownership a challenging situation. The only thing that has to be considered is the eligibility for this great opportunity. As long as an individual is qualified for it, VA loans could be right for you. 

We Can Help You!

I hope that helped. Now for more information, please go to our website at veteransnationalmortgage.com click apply now, for a free interest rate, quote, and pre-qualification that does not affect your credit.

Or you can call us directly at (888) 922-2022 

Our team is excited to help you with your dream home.

We’ll see you next video.

You may also be interested in knowing about How Much Home Can I Afford >> HERE <<
or 
A Comprehensive Guide to Understanding the VA Home Loan Benefit >> HERE <<

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