In 2021, almost 75% of veterans were not using their VA home loan benefit, according to The Mortgage Reports. That means about 15 million veteran families were missing out on the benefits and advantages of a VA home loan. Some of the benefits of a VA loan are financial, and others include lifetime benefits and financial counseling in times of hardship. If you plan to purchase a home, don’t miss out on this entitlement.
Who Is Eligible?
VA home loans are available for veterans, service members and eligible surviving spouses. National Guard members with 90 days of active service, with 30 consecutive days served under specific situations, are also eligible for a VA loan.
No down payment? No problem. Since the VA guarantees part of the loan, lenders offer more generous terms. Do you have a bankruptcy or foreclosure in your past? The VA home loan will help you get back on your feet much quicker than conventional loans.
The VA Home Loan entitlement is an example of the benefits veterans can enjoy for the rest of their lives.
8 Reasons the VA Loan Is a Great Option
There are many reasons a VA loan is a great option; here are some reasons why veterans should consider using this entitlement instead of a traditional home loan.
You don’t need a down payment. Many military families struggle to save enough money for a down payment on a home. Rocket Mortgage says the average down payment on a home is 6%. For example, a $300,000 home usually requires an $18,000 down payment. With your VA home loan entitlement, there is no down payment required. However, some lenders may still require a down payment, so do your homework on lenders first.
Skip the mortgage insurance payments. Private mortgage insurance, or PMI, is typical for a conventional loan. It protects the lender if you default on your loan. It’s paid either upfront, monthly or a combination of the two. A VA home loan does not require this, saving you additional money.
Pay less closing costs out of pocket. Closing costs -- fees you pay to your lender to cover things like inspections -- are about 3%-6% of the loan amount. The buyer typically pays these; however, concessions can be made for the seller to pay, depending on the market and previous agreements. With a VA loan, the rules are slightly different. For example, up to 4% of the purchase price can be applied to escrow accounts or the VA funding fee, according to Rocket Mortgage.
Snag lower interest rates. VA loans offer competitive interest rates. According to Bankrate, the average interest rate for 30-year fixed conventional loans is 6.93%. USA Today reports VA loans are closing at an average of 6.32% for the same period.
Avoid prepayment penalties. It may seem wild, but mortgage companies often write in a penalty if you pay some or all of the loan early. Of course, mortgage companies like when you take the full 30 years to pay off a loan, because they are making money off the interest of that loan. But the VA loan doesn’t do that. Significant payments or paying it off ahead of schedule is allowed.
Get help when you need it. The VA has financial counselors to help when you have a financial difficulty that may affect your ability to pay your mortgage. They can help even if you don’t have a VA loan. The loan technicians can help you avoid foreclosure by working on a repayment plan or modifications. There are several options, but you must reach out as soon as you know you cannot pay the next mortgage payment.
Pass a great deal on to someone else. One great benefit to using a VA loan is that it can be assumable, meaning someone else -- veteran or not -- can take over your loan. Loan assumption is especially beneficial when you are ready to sell your home and have a better interest rate than currently available.
Use your VA loan again, and again. Veterans can use VA loans multiple times. There are some limitations, but if you have paid the house in full and sold it, had your loan assumed by another veteran or have a balance on your mortgage and still own the home, you may be able to use it again.
The VA Home Loan entitlement is an example of the benefits veterans can enjoy for the rest of their lives. Remember these reasons and consider a VA home loan when purchasing your next home.