Available to all military families, VA loans are an excellent way to finance the purchase of a new home. The loans come with several advantages especially for first time buyers.
1) No down payment.
One of the biggest challenges for anyone applying for a mortgage is coming up with the required down payment. Compared with other types of home loans, the VA loan is very beneficial because first time buyers are not required to provide any down payment. Other programs like FHA loans and commercial home loans require a substantial down payment.
2) Low closing costs.
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With other mortgages, buyers have to pay closing costs separately before their funds are approved. With VA loans, the closing costs can be rolled into the loan amount. This means borrowers do not have to pay the closing costs from their pockets. Instead, the costs are spread over the term of the loan, which is usually between 15 and 30 years.
3) Low monthly payments.
Compared to other home loans in the market, the monthly payments for VA loans is significantly lower. Apart from this, the amount of closing fees charged for a VA loan is restricted. The monthly payments are determined by the amount of loan that a borrower is approved for and the term of the loan. Typically, the longer the term of the loan, the lower the monthly installments.
4) Fast and easy approval.
Getting approved for a VA loan can be fast and easy. To be eligible, you must be active in the armed services, a veteran or a spouse of a veteran or an active serviceman looking to purchase a home. You do not need to have a good credit score or a minimum income source to be approved for a VA loan.
5) Lower interest rates.
VA loans carry the lowest interest rates in the market. With other mortgages, borrowers are usually charged an interest rate based on their credit history, amount of loan they are applying for and other factors. The interest rate can reach double digits. With VA home loans however, the typical interest rate charged is two percent. Borrowers who provide a down payment of more than five percent can get even lower rates.
6) No prepayment penalty.
With a VA loan, borrowers have a right to prepay without being charged penalties. Many lenders require borrower to pay at least one monthly installment of principal or $100, whichever is less. With no prepayments, borrowers end up paying less for the loan.
VA loans make it easy for military families to own homes. Spouses of active servicemen or veterans can apply for the loans and take charge of their housing. Borrowers who have good credit or can provide a down payment have a higher chance of being approved for VA loans quickly, at low rates.