There are many financing options available for home buyers each of which has its own unique pros and cons. Most of the veterans and active-duty military members are attracted to get federally-backed VA loans because of its huge benefits over traditional loans.
Buying a new home is a very complicated process but with a veterans-guaranteed home loan, military members can get their dream house comparatively easier. There are numerous reasons to choose a VA loan over a traditional loan, but first-time home buyers who qualify get exclusive additional benefits offered by VA.
Here are some details you might need to know about VA loans if you are buying your first home.
- No Down Payment
First time home buyers are generally younger couples who do not have enough money accumulated yet to pay for a down payment. VA loans are perfect for such families as it require little to no down payment unlike the traditional loan.
Most of the other mortgage programs require between 3.5 to 20 percent cash down but a veterans-guaranteed loan allow qualified borrowers to retain their savings for future use.
- Lower Funding Charges for First Time Home Buyers
The funding charge is set up to offset the Government expenditures for VA home loan programs. But comparative to the traditional loans, first time home buyers are offered the lowest funding rate with a VA loan. According to the official procedure, standard military members who are buying their first home, the funding charge for purchase loans for them is 2.30%. For those members, who have bought a home before using a VA loan, the funding charge is 3.60%.
Moreover, surviving disabled vets and surviving spouses are exempt from the funding charges.
- Flexible Credit Qualification
Conventional programs have firm credit requirements. First time home buyers, however, usually don’t have a strong credit history as it takes some time to establish the credit. Unlike conventional loans, VA loans credit requirements are much more flexible and less stringent than conventional loan requirements.
Therefore, first time home buyers who do not have a strong credit history can still qualify for a VA loan with their poor credit. VA-approved lenders usually consider a number of things like debt-to-income ratio, residual income etc. to figure out if a military member qualifies for a certain VA loan or not.
- Private Mortgage Insurance (PMI) not required
Another big advantage with VA approved loan is it doesn’t require a Private Mortgage Insurance (PMI). When using a conventional loan, if home buyers are not able to put 20% cash down, they are required to pay PMI. Some mortgage programs require monthly PMI payment while the other programs require an upfront payment of less than 20%.
However, VA supports a portion of every VA loan granted, which covers the cost of PMI. This absence of PMI saves a lot of bucks every month for military borrowers.
- Lower Monthly Payments
Since VA loans don’t require PMI payments every month, it leaves more money in your pocket with lower monthly mortgage payments. In general, VA loans save you thousands of dollars compared to the traditional mortgage over the course of your total mortgage duration.
The money you will save by getting a VA loan for your home can be spent in other useful things like home redecoration, furnishing, college funds etc. But buying your first home with a VA loan requires some professional assistance to help you take the complete advantage of flexible VA loan terms.
Our qualified team is here to assist you throughout the process of VA home loan. Feel free to contact us anytime.
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