The Pros and Cons of VA Loans

Texas veteran home loanMillions of Americans nurture a long-cherished dream to buy a place they call “home,” where they can spend the rest of their lives living peacefully. Since most don’t have large cash reserves in order to purchase that home outright, they opt for a home mortgage to finance their entire investment. This is perhaps the only way for them to actualize their dream.
The situation is often different for military personnel and veterans. Besides their lack of credit history, down payment requirements and stringent rules and regulations create major hurdles when they plan to buy a home.

One of the attractive home financing options for military borrowers is the VA loan. These flexible loans come with significant financial benefits for retired and active military personnel. However, like any other mortgage program, VA loans also have some pros and cons.

VA loans were introduced to thank military personnel and veterans for their dedicated service to the nation. This loan program has seen tremendous growth, especially during the tight lending market and fragile economic condition. Read on to get detailed information about the pros and cons of VA loans.

Pros of VA Loans:
Here are some of the advantages to opting for a VA loan:

  • No Down Payment – One of the significant benefits of VA loans is that there is no down payment. In fact, qualified borrowers can purchase homes worth $417,000 without making any down payment.
  • No Mortgage Insurance Premium (MIP) – Another advantage to opting for VA loans is that there is no MIP involved. People who opt for FHA or Conventional loans have to pay the MIP every month. In fact, lenders are prohibited from charging MIP on VA loan programs.
  •  Flexibility – VA loans provide flexibility in the case of foreclosure and bankruptcy. Borrowers who qualify for VA mortgages can be eligible for a loan after just two years of a bankruptcy or foreclosure. The wait is much longer when it comes to some of the other mortgage loan programs available.

Cons of VA Loans:
Funding Fee – One of the cons of opting for a VA loan is the upfront funding fee that you need to pay. If you have never used your VA loan eligibility, then you need to pay a 2.15% funding fee. In case you have used your eligibility before, then you need to pay 3.3%. However, if the borrower has service-related disability there is no upfront funding fee required.

The major advantage of a VA loan is that it you don’t have to worry about the down payments. However, as it comes with a funding fee, it is advisable to check the other loan options with the help of a reputed mortgage company. Such a company can guide you to select the best home mortgage program.


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