VA Home Loans - Pros Cons VA Home Loans
VA home loans: VA (Veterans' Affairs) loans are mortgage loans that are designed specifically for active and former members of the armed services, who meet specific criteria. They are popular -- in a typical year, around 490,000 loans are guaranteed by the government, totaling over $63 billion. Contrary to what many people think, the VA doesn't actually lend the money, it just guarantees the loan.
Pros cons VA home loans
VA mortgage has several advantages. As long as you have all the necessary paperwork verifying current or past military service, they are fairly easy to apply for. The loans are also available to reservists and members of the Public Health Service, as well as the surviving spouse of a veteran as long as the death was service related. And the good news also is that this service is available from most mortgage lenders.
Most VA home loans don't require a down payment and around 90% of applicants take advantage of this when applying. In fact, around 80% of people who qualify for it would not be able to qualify for a regular mortgage, although credit and income are still taken into account when approving any applicant. And if you decide to pay off the balance of the loan early, there are no penalties.
This is a versatile service -- it can be used not only for a loan on a house, but also for a condo or townhouse as well. You can also take out a VA loan if you are building your own home. And if you already have a mortgage and are thinking of refinancing, a VA home loan rate will almost certainly be a good rate for you not only for its lower interest rate, but lower monthly payments too.
You also don't need to have private mortgage insurance as the VA itself guarantees the loan amount; in fact it prohibits lenders from asking for this. This can be a huge savings -- on a mortgage of $150,000 the savings would be anywhere from $1,500 to $4,500 over the course of a 30 year mortgage. And the seller can pay all of the closing costs on the mortgage.
Pros cons VA home loan scenario means that there're not only advantages, but at least one disadvantage of VA loans -- with a charge called a funding fee. This was levied by Congress in 1982 and is typically from 1.25 to 3% of the cost of the home, depending on the applicant's service record, although it's waived for qualifying disabled veterans. The fee can be financed along with the amount of the loan, although the cost of doing this can add up over a 30 year mortgage.
Another disadvantage is that co-borrowers are limited to qualifying veterans and their spouses only. And some financial analysts point out that a higher loan amount could have the effect of reducing the available equity in the home, especially during the first few years of ownership.
In all, there is no question that the VA home loans rate are very attractive, couple that with no down payment for qualified applicants -- what you get is one of the best mortgage terms available.