VA loans are one of the ways Americans thank their servicemen for defending our freedoms and democracy. The loans are extended to military veterans and represent one of the most powerful lending programs in the market. VA loans are available at flexible rates and ensure support to eligible veterans in areas where private financing is otherwise not available or easily accessible. The loan scheme is extremely popular among veterans, however, not all know about the benefits and perks that the program offers. The blog discusses some of the advantages.
Pre-payment does not invite a penalty
Unlike other loan schemes, VA loans don’t carry a prepayment penalty. You can make extra payments as and when you desire to avoid accumulated interest over the loan’s life cycle. You can also ask the provider to deduct a little extra amount of money towards installment payments.
You don’t need to pay mortgage insurance
Mortgage insurance premium is the amount you need to pay every month if you’re not making a downpayment of at least 20% of the total amount when availing a loan under conventional programs. The VA program eliminates the need to make any such payments, which helps you save a substantial amount of money throughout the loan’s life.
VA loans are for particular type of homes only
The VA will offer loans to finance the purchase of properties in “move-in-ready” condition such as single family homes, condos, and modular housing. If you’re mulling seeking finance for a property other than the ones mentioned above such as a farmhouse, or a fixed upper, VA loans are not for you.
You need to pay a mandatory fee to refinance your loan
You need to pay a processing fee when purchasing and refinancing a VA loan (normally 2 percent of the total loan amount). The fund that the VA collects by charging this fee helps run the program. The fee can be completely waived-off for those who have sustained service-related disabilities.
VA loans place limits on co-borrowers
You may need to make a down payment if your wife or a veteran is not your co-borrower and will live in the home. Very few lenders offer such types of joint loans and you should educate yourself on the terms and conditions of the contract before getting into an agreement.
Veterans can avail a loan even after declaring bankruptcy
Under the VA loan program, even veterans filing Chapter 7 or Chapter 13 bankruptcy can take out a loan. For those filing for Chapter 7 bankruptcy, the loans are available two years after the discharge, whereas those seeking protection under Chapter 13 bankruptcy can be eligible 12 months removed from their filing date. Veterans facing foreclosure on their properties are also eligible to apply.
The blog enumerated some lesser-known facts about VA loans. If you’re a veteran and mulling going for a VA loan, ensure that you know the current rates for your location. Just use the keywords describing your location to Google the prevailing rates. For example, if you’re located in Texas, the useful search-phrase can be ‘VA loan rates Texas’ or ‘Texas VA home loans’. Additionally, you need to work on your credit score before filing your application, as a weak credit rating is the most significant impediment in taking out a VA loan.