The VA home loan benefit should really not be thought of as a benefit—it’s a reward. By serving your country honorably the United States government has a way of saying thank you way beyond your monthly pay and pension. The original G.I. Bill set in 1944 provided returning WWII veterans with an extensive array of entitlements to help returning soldiers adjust back to being civilians once again and perhaps the most popular is the VA mortgage. What are the top five benefits of a VA loan?
Zero Down. Without a doubt the biggest advantage of a VA mortgage compared to other types of financing is the zero down feature. Soldiers returning from battle had little time or wherewithal to set up a savings plan in order to buy a house. They had other things going on. VA mortgages eliminate the down payment requirement.
No Mortgage Insurance. Low down payment mortgages, including FHA and conventional loans require not only the down payment but a sizable mortgage insurance premium as well. Monthly mortgage insurance can add hundreds to a monthly payment and the VA program eliminates monthly mortgage insurance.
Great Rates. In addition, the interest rates on VA loans are as competitive as any other and even better in some instances when you compare a conventional loan with a 5.00 percent down payment or an FHA loan with a 3.5 percent down. There’s no interest rate penalty on a VA loan just because there’s no down payment.
Low Closing Costs. The VA prohibits the veteran from paying certain types of closing costs, reducing yet again the amount needed to close on a VA loan. Veterans are not allowed to pay certain lending costs such as underwriting and processing fees among others.
Assumability. VA loans have an assumability feature meaning the veteran can transfer an existing VA loan when selling the property. This is an attractive feature if the existing mortgage rate is lower than current market rates.