3 Important Things To Should Consider About VA Home Loans
This BLOG On 3 Important Things To Should Consider About VA Home Loans Was UPDATED On January 2nd, 2019
Joining the military has the advantage of allowing service members and their families to enjoy various financial benefits, including VA loans. This program provides veterans and their families with a mortgage on the resources of a private lender. Key advantages of the VA loan program include:
- The capability to receive a mortgage loan with very little or no down payment
- You do not have to pay your private mortgage insurance if you buy a home with an initial contribution (down payment) of less than 20% or refinance with not as much of 20% of equity
3 Important Things To Should Consider About VA Home Loans And IRRRL
Streamlined refinancing, also called IRRRL (Interest Rate Reduction Refinance Loan). It is refinancing a loan at low interest rates. When interest rates fall, IRRRL allows the lender to refinance the mortgage with much less hectic documentation.
Despite these benefits, purchasing a house needs a lot of effort, investigation and planning. If you are planning to buying a home and eligible for a VA loan, think of these three important points you must consider:
- Should you get home finance up to 100%, even if VA mortgage allows it?
Generally, lenders ask homebuyers to obtain PMI (Private Mortgage Insurance) if the borrowers are paying down payment which is less than 20%, this is for the protection of lender in case the borrower became defaulter. The reason is that the more protection lenders are in, the more they invest.
- Although studies have confirmed and refuted this thesis, it can be assumed that a financially disciplined veteran, who saved 20% of the cost of a house, will probably have more ability to pay for a home purchase instead of a the one who have nothing
- So, instead of trying to get 100% home financing through a VA loan, it might be best to save some money for the down payment, especially if you are still considering a professional move
3 Important Things To Should Consider About VA Home Loans Versus Conforming Loans
- Compare the cost of VA mortgage and Conventional loan:
First, you may have to pay VA mortgage fees which ranges from 0.5% to 3.3% of your total loan amount, depending on different factors. (There are few exclusions, but it would be best if you plan to include the cost of VA funding fee in the repayment cost of mortgage.) Other restrictions may apply, including closing costs that may be counted in a VA mortgage.
In addition, VA mortgage rates sometimes differ significantly from those of regular mortgages. Before making a decision, review the number (first installment, total cost, principal and interest) of the VA loan and regular mortgage loans.
3 Important Things To Should Consider About VA Home Loans On Having More Than One VA Mortgage
- Veterans can have more than a single VA-sponsored mortgage at once, contingent to the conditions:
Another advantage of VA mortgage loan is that you can get more than one VA mortgage loan i.e, to refinance your previous VA loan. Some veterans who had bought their first home in 2002 through VA loan they refinanced it about three times in next 12 years. This way they lowered their interest rate from 6.75% to 3.5%. You can do this through IRRL program offered by Department of Veterans Affairs. This process will also require very less documentation or paperwork and very low cost. Each time you refinance your VA mortgage loan, the VA will reset your mortgage balance and issue a new certificate of eligibility which makes you capable to take another VA loan. Then you can use your remaining balance for other purposes and apply for second VA mortgage.
VA promises to pay a quarter of the loan amount. But, the amount is directly related to the amount of loan you can get from the lender.
However, you still need a down payment, but buying a second home is more logical for you and you can plan accordingly. Since military families move a lot, they can buy a second (or third) property, cheaply. This maybe a viable option and you can do it, but still it doesn’t mean that you should definitely do it.
If you have been denied a home loan or have any questions about real estate or mortgage please contact the author Michael Gracz of Gustan Cho Associates Mortgage Group. Mike Gracz works when you work, so feel free to contact him any time.