One of the most significant benefits of a VA loan is that there is typically no down payment requirement. Other benefits include low to no credit score requirement, no mortgage insurance, and 90%-100% financing for eligible borrowers.
The details of VA loan benefits include:
No down payment required
The main benefit of VA loans for veterans and servicemembers who want to buy a home is the fact that there is no down payment requirement. Saving for a down payment can be a barrier for many homebuyers, being able to buy a home without one makes homeownership more accessible for more borrowers.
No to low credit score requirement
The VA has no minimum credit score requirement to qualify for a VA loan. Lenders can set their own requirements and these may range from the 500-600s depending on the lender.
Lower interest rates
VA loans typically offer lower interest rates, well below those of Conventional loans. This is because VA loans are insured by the Department of Veterans Affairs. This government backing reduces the risk for lenders, allowing them to offer more favorable terms, including lower interest rates. As a result, borrowers who qualify for VA loans can benefit from lower monthly payments and reduced overall borrowing costs compared to Conventional mortgages
No monthly mortgage insurance premiums
VA loans don’t have mortgage insurance like some Conventional loans and FHA loans have. While FHA loans have a mortgage insurance premium and Conventional loans often require private mortgage insurance, VA loans don’t have any monthly mortgage insurance premiums. VA loans do have a funding fee, but this is a one time cost, not a monthly payment.
No prepayment penalty
VA loans do not have any prepayment penalties. Borrowers can pay off their loan early, sell, or refinance without paying extra. This means that you won’t be penalized for making extra payments, selling their home even in a short time, or refinancing to get a new interest rate.
Reduced funding fee
You may qualify for a reduced VA funding fee on a purchase mortgage or even a full exemption if you have a service-related disability. Spouses of veterans may also qualify for a VA funding fee exemption under certain circumstances.
Lower closing costs
The VA places limitations on the fees that lenders can charge when originating and servicing these loans. This means that VA loans have lower closing costs, which can be a significant savings for borrowers.
In addition to these specific benefits, there are also some general advantages of VA loans. These include financial savings, increased accessibility, and more flexible terms and conditions. The details of these advantages include:
Increased accessibility: VA loans were designed to make it easier for veterans and their families to achieve homeownership.
Financial savings: VA loans may be able to save borrowers money since they offer no down payment, lower interest rates, and lower closing costs.
More flexible terms: VA loans offer more flexible terms, including more lenient credit requirements and a higher debt-to-income ratio.
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