THINGS TO KNOW ABOUT VA LOANS

Since the VA loan program was introduced as part of the GI Bill, more than 20 million veterans and service members have used it to get a mortgage. Although vets’ financial backgrounds vary, many of them would not otherwise be able to get financing. Despite the program’s benefits, only 13% of eligible veterans have used their entitlement, in part because many do not understand the benefits of Veterans Affair Loans. Below is a list of some of the biggest benefits of VA Loans as compared to FHA or conventional financing.

No Down Payment is Required

VA loans come with no down payment requirement. Most other home loans, including those from the FHA, have a minimum down payment of at least 3.5% of the purchase price. While 100% financing loans were partly responsible for the housing market crash, the VA still offers these loans in a safer way.

No-Closing Cost Options Are Available

Other home loans require the payment of closing costs like escrow fees, inspection fees, title insurance, taxes, homeowner’s insurance, and more. However, VA loans are structured in a way that’s favorable to the buyer, which means closing costs are covered. The average closing costs are roughly 3% of the home’s purchase price, and a VA loan can help a buyer save a significant amount of money.

Non-Allowable Closing Costs

If a buyer opts to fund the closing costs, or if the seller refuses to pay them, the VA will cut those costs that are payable by the homebuyer. In traditional home sales, buyers pay a list of expenses, including:

  • Settlement fees
  • Closing fees
  • Document prep fees
  • Conveyance fees
  • Legal fees beyond interest rate locks, photos, title work, amortization schedules, phone calls, escrow fees, trustee’s fees, application processing fees, and notary fees
  • Finder’s fees
  • Brokerage fees

Thankfully, with a VA loan, these charges are not permissible.

A Certificate of Reasonable Value

Using cash or a conventional loan to pay for a home means that buyers rely on appraisals as a way to determine the property’s value. In the VA program, a certificate of reasonable value is included. These certificates are good for up to six months, and they’re applicable to any VA-eligible buyer.

The VA’s Home Inspection Program

As part of the pre-purchase appraisal process, the VA’s home inspector ensures that the property for sale meets all codes and living standards set forth by the Veterans Administration. The home’s roof, furnace, plumbing, and other parts will be inspected by the VA, which requires repairs to be done at no cost to the home buyer if the property isn’t up to the VA’s housing code.

Streamline Refinances Bring Lower Interest Rates

If a VA homebuyer has bought property using his or her entitlement, they have the ability to refinance the home loan to a more favorable interest rate. Known as the streamline refinance process, the borrower can refinance without the hassle of a credit check, appraisal, and most of the documentation needed in the preliminary application process.

No Prepayment Penalties

Most of today’s traditional home loans come with a prepayment penalty. This simply means that, in the event that the home is refinanced or sold, the lender may charge the owner fees to make an early payment in full. Under some circumstances, the penalty can run into the tens of thousands of dollars. With VA Loans in Waunakee WI, there’s no penalty for early payment.

A Cap on Points

Many mortgage lenders and brokers assess origination fees, which are referred to as points. With a VA mortgage, there is a limit on the amount a lender or broker can charge in origination fees. Lenders and brokers cannot charge a buyer more than the amount that the VA has determined is reasonable.

Loans Are Assumable

VA loans are assumable by other veterans. With a conventional home loan, there’s usually a stipulation that a new buyer must acquire his or her own loan. However, the VA allows vets to sell a property and have the new buyer assume responsibility for payment of the previous loan.

Rates are Low

When home loans are guaranteed by the VA, they carry very low interest rates. These lowered rates are partly set by the Federal Reserve. Most traditional mortgages have an adjustable rate that starts at 3% and may exceed 12%. With a VA home loan, there are no worries about rate increases. Because the rate is set for a period as long as 30 years, a borrower’s yearly payments will stay the same for the life of the loan.

There are many reasons for veterans, their surviving spouses, and service members to consider VA Loans in Middleton WI. From low rates to a lack of prepayment penalties, these reasons are quite compelling. Call today or visit the main site for more details.

 

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