When searching for the right home loan, the mortgage application process can be overwhelming at best, so it’s always a good idea to educate yourself on your options. As a veteran and a new homebuyer, you may be asking yourself, “what’s a VA loan?” To start, the “VA” stands for Veterans Affairs. Partially supported by the Department of Veterans Affairs and made by private lenders, VA loans have no restrictions on how much money you can borrow; however, you may not necessarily get all of the money you ask for.
Just last year, the U.S. Department of Veterans Affairs reported that there were over 700,000 VA loans guaranteed throughout the U.S. in 2017, which signifies a five percent increase from the year before.1 Even better news: VA loans’ foreclosure rates are some of the lowest in the country. The Deputy Under Secretary for Economic Opportunity for VA, Chris Coy, said that VA loan servicing efforts are some of the key ways they’ve been able to keep these rates minimal.2 Regardless of these positive reports, if you recently discovered you’re eligible for a VA home loan, it’s important you understand the fine print before committing to anything.
VA Loan Benefits
One of the most common reasons most seek out a VA loan is due to the traditionally lower rates they offer than what you might find when applying for a loan at a traditional bank. And, in most cases, you will not necessarily need to make a down payment, which carries significant appeal as compared to conventional and FHA loans.
In addition to avoiding monthly mortgage insurance premiums (PMI), you also could enjoy a lower average interest rate than other types of loans, providing you with more room to breathe as you navigate homeownership. If you’re having trouble keeping up with other loan payments, you will at least not have to assume an even larger financial burden. And if you want to pay your loan off early, no problem! You can easily do this without incurring any fees or penalties.
VA Loan Limitations
If you’re someone who wants to make sure everything is in order before you sign the closing papers, it’s important to note that a VA loan appraisal does not include a thorough inspection of your new home home — you will want to get this done before you purchase it. While you will most likely get your loan, there will be no guarantee that the house will be in prime condition unless you do your due diligence.
Before you commit to the loan, consider which steps you need to take to ensure your investment will be beneficial in the long-run, including what you might be able to sell it for years down the line. VA loans do not include any legal advisory services, so it’s recommended to consult with professionals who know what to look out for.
Loan limits are based on geography and can be found on VA.gov:
VA Loans for a Second Home
When many people think of second homes, images of a vacation home are conjured up. However, in regards to VA Loans, you may be eligible for a second primary home. There are two factors: Eligibilty and occupancy (time frame). First, if the veteran does not use up there entire eligibility on their first home, they may utilize those resources on a second home. The other caveat, is that the veteran must move into the second property in a reasonable time frame (usually 6-12 months). Although this option is fairly restrictive, it can come in handy in certain situations, like divorce, military relocation (needing to purchase a home prior to selling old home), etc.
Be Cautious While Remaining Accountable
If you’re a veteran looking to buy a new home, it’s worth your time to explore the advantages and disadvantages of a VA loan. Traditionally more affordable than other types of loans, VA loans provide you with the opportunity to benefit from your years of service while simultaneously investing in your financial future.
While VA loans may seem attractive, it’s important to remember that a loan must always be paid back. Regardless of VA loan benefits, you always want to make sure you’re never borrowing more than you could pay back (even if you enjoy relatively low-interest rates). As with anything, if you feel divided on which loan to choose, consult with a professional to see if there are any more suitable options available to you.
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.