Facts About VA Home Loans
Those serving in the Armed Forces of the United States, or those who are veterans of that service, have an exquisite way to buy a home because of the care Uncle Sam bestows on those in uniform. These VA home loans are not handouts, the are rewards for service. These loans do not hand money to veterans, nor are they loans fomented by the government; they simply apply some rules that make it easier for the veteran or service member to realize the American dream of home ownership.
Rather than a cash grant or other similar transfer, the Veterans Administration puts a guarantee a Va home loans made by traditional financial institutions such as banks, credit unions or mortgage companies. The Veterans Administration underwrites these loans. Thus, should the home buyer default, the lender knows that the government will find the money to cover the cost of the loan. That is putting it simply, of course, but that is the base. This guarantee makes it more likely that the veteran or service member will be approved for the loan.
VA Home Loans Save Down Payments, Closing Costs
Va home loans save money for veterans and service members in that they replace the protection of a down payment that most lenders require with the protection of the full faith and power of the federal government. Unless the buyer opts to pay one, VA home loans require no down payment. Another way a veteran will see savings is that the government limits the amount of closing costs and all the other nit-picking costs and fees that a lender can charge a borrower.
Being overcharged with administrative fees is impossible. No up-front processing fees or other consideration fees can be charged. Closing costs become the expense of the seller. If some fees must be exacted on the veteran or service member taking the VA home loan, their amount is limited and are very much lower than found with non-VA home loans.
Lower Monthly Payments with VA Home Loans
The monthly mortgage payments for VA home loans are often considerably less than for standard home loans. A good part of the reason lies in the fact that no mortgage insurance is required. Mortgage insurance is another way lenders have of protecting themselves should a buyer default. With the government underwriting the loan, no insurance is required. There are restrictions on the rates of interest that can be charged.
Of course, with lower interest rates, monthly payments are lower. Another maddening fee that can beset standard home buyers is the pre-payment penalty. Why anyone would charge a fee for paying off a loan ahead of time is probably just an indicator of institutional greed. If a veteran has the money to pay off a loan before it has matured, he or she is not penalized for making good on the loan.
Bad Credit Borrowers Have an Advantage
Because of the governmental guarantees, veterans or service members can usually land a home loan. If the service member or veteran has been meeting their bill obligations for the past year to eighteen months, a VA home loan can still be approved. And interest rates for VA home loans cannot be adjusted due to credit ratings so they can remain reasonable.
Other Advantages of a VA Home Loan
If a veteran or service member choose to sell the home, the mortgage may be assumable by the buyer. The marketability of such a home is greater, making it easier for the veteran to sell. Appraisers for VA home loans must be picked at random rather than chosen by the lending institution. This makes it unlikely that appraised values will be skewed in favor of the lender. A veteran or service member has many advantages when it comes to buying a home. These advantages are rendered as a reward for service.