In previous blogs we have covered the basics of a VA loan, and now we’re circling back to reveal several hidden benefits that are associated with obtaining one.
No Money Down: While this is the most known and obvious benefit of VA loans, the huge advantage that this creates for VA buyers cannot be understated. While most housing loans require at least 3.5% of the purchase price down payment just to qualify, VA loans come at zero cost to the buyer.
What that means: For every $100,000, you are saving yourself at least $3,500 as compared to normal home purchasers. While similar programs are often available for first-time homebuyers, they will almost always have built-in costs that partially penalize the buyer through at least a portion of the loan.
No Primary Mortgage Insurance: Primary Mortgage Insurance (PMI) is a premium built in to most home loan types, and intended to protect the lender in case the buyer defaults on their loan. While it is necessary, it is also an added cost that VA loan buyers don’t have to worry about.
Standard loan PMI costs can range from 0.5% to 1% of the entire loan on an annual basis, depending on the loan type. For example: for every $100,000 of a loan, the buyer in a traditional loan might be responsible for up to $1000/year, which breaks out to $83.33/month.
What that means: VA Loan recipients never have to worry about this cost, while traditional loan recipients typically require at least a 20% down payment to avoid this additional payment.
No Prepayment Penalties: Have you gotten a reenlistment bonus and want to pay a little more to pay down your mortgage? Wonderful! There is no penalty for making bigger payments on your loan amount or paying your mortgage off earlier.
Lenient Debt-to-Income Ratios: All mortgages require a debt-to-income ratio (DTI) that requires the buyer to have a debt lower than a certain percentage, as compared to their income. For example, if a borrower makes $10,000/a month, they cannot have more than $4100/month in acquired debts. For a VA Loan that standard ratio is 41%, however, some lenders can stretch the ratio significantly more with higher credit score. For specifics on DTI ratios, ask your UAM VA loan specialist.
Flexible use of Closing Costs: Closing costs are inescapable when you buy a home. One of the best things about VA loans is that they allow the seller to pay up to 4% of the closing costs. This can be used for anything related to the loan, including items such as payments towards previous judgments or paying down credit card amounts. Ask your UAM VA specialist for specifics on what your closing costs can be used for.
Lenient Foreclosure: While this is never the intended outcome for anyone, foreclosures do happen. The great thing about a VA loan is that a foreclosure does not automatically disqualify you from obtaining a VA loan in the future. In fact, it is possible to secure a VA loan in as short as 2 years after your foreclosure.
For specifics on VA loans, please contact your United Atlantic Mortgage VA specialist.