When looking for a new home, many military families set out with a checklist of desired features such as more bedrooms for a growing family, extra counter space in the kitchen, or a larger backyard to enjoy. Having a checklist for your finances during the home-buying process is just as important, which includes selecting the right mortgage.
A VA home loan is a popular mortgage option for many service members and veterans. These loans are provided by private lenders, such as banks and mortgage companies, but a portion of the loans are guaranteed by the U.S. Department of Veterans Affairs (VA) leading to more favorable terms and financial benefits.
Here are three things to consider when deciding if a VA loan is right for you:
Are you eligible?
Most active duty military members, veterans, reservists and National Guard are eligible for the VA loan benefit. In addition, unmarried spouses of military members who have died while on active duty or as a result of a service-related disability may also qualify. Before you are approved for the loan, however, you will need to provide a Certificate of Eligibility (COE), which you may request during the pre-approval process with your lender.
What are the advantages?
Once your eligibility is established and you are approved for a VA loan, you may take advantage of these benefits:
Limited-to-no-down-payment: One of the most attractive features of a VA home loan is the ability to purchase a home without requiring a down payment. Some areas do have a borrowing limit, however, and you may have to provide a down payment if the home you’re interested in exceeds this limit.
No private mortgage insurance (PMI): Another advantage of the VA Loan is that it does not require PMI. Many conventional loans with less than 20 percent down require PMI to protect the lender if the borrower stops making payments on the loan. Without this added expense, VA borrowers can afford to buy more home.
Reused VA loan benefits: Once your original VA loan has been paid in full, or if you use your entitlement to rent out your first home, your VA loan benefits can be applied to purchasing an additional home without a down payment. Just be aware that if you need to use your VA loan benefits again, your funding fee may be impacted.
Refinancing options: The VA loan can be refinanced, which provides you with more options to obtain a lower interest rate if rates drop in the future.
What is the main difference?
The funding fee is the main difference between other types of low-down-payment loans and a VA loan. Traditionally, the VA loan costs less, although a one-time funding fee is required. The amount of the fee is determined by the amount of the down payment and the type of veteran, so you’ll want to do your research before making a decision.
The best way to know if the VA loan is the best option for you is to speak with a licensed mortgage professional. They can discuss the different mortgage options available and ultimately decide which loan is best for you and your family.
Disclaimer: AAFMAA Mortgage Services LLC (AMS) is an Equal Housing Lender. NMLS #1423968. All loans subject to credit approval. This is not a commitment to lend. AMS is licensed in 17 states. See a complete list of licenses and disclosures at www.aafmaa.com/mortgage.
