VA loans can save veterans and their families significant dollars over the life of a mortgage. They also honor the sacrifice made by those who served our country.
Created in 1944, the VA Loan Guaranty program provides guaranteed loans to qualified veterans, active-duty service members and some surviving spouses. These loans provide major financial benefits, including the ability to purchase a home with no money down. In today’s real estate market, that’s a highly prized commodity.
Financial Benefits of a VA Loan
That no down payment feature means that veterans can come to the table with less liquidity and cash on hand than most other buyers. VA borrowers in most parts of the country can purchase a home worth up to $417,000 without putting down a single dollar.
The purchasing power VA home loans is all but unmatched in the marketplace. But these flexible, low- and no-cost loans also provide other significant savings for veterans and their families, including:
No PMI. Private mortgage insurance is a monthly cost that conventional borrowers have to pay unless they put down at least 20 percent. There’s no PMI on a VA loan, which means veterans can funnel those dollars into home improvements or other purchases.
Sellers pay closing costs. Veterans can avoid paying most, if not all, of the closing costs associated with a loan. The VA allows sellers to pay up to 6 percent of closing costs and concessions. That means veterans don’t need a pile of cash on hand to cover those final costs associated with their loan.
Great Rates. VA loan rates are frequently lower than their conventional counterparts. Even a slight difference in rates can make a big difference over the life of a 30-year mortgage loan. For example, on $300,000, 30-year fixed-rate mortgage at 5.0 percent, the monthly payment is $1,610 without taxes, insurance and other costs. At a rate of 5.5 percent, the monthly payment jumps to $1,703. Over the life of the loan, that extra $93 per month adds almost $34,000 to the cost of the loan.
No Prepayment Penalty. Unlike some conventional loans, there is no penalty for prepaying your VA loan. That means you can spend extra money each month paying down your principal, which will shave years and thousands of dollars off your mortgage.
Those are just a handful of the big-time financial benefits of VA loans. These powerful lending tools have helped more than 18 million veterans become homeowners in the last seven decades.
For more information about VA Loans: Visit our VA Loan rates page for more information about applying for a VA Loan.