Why Choose a VA Home Loan to Buy a House?

As a qualifying veteran for the VA home loan program, the government has afforded you a unique opportunity to purchase a home.  However with ever decision, there are pros and cons to this opportunity.  Review the following information before deciding if a VA loan is right for you:

Why choose a VA home loan: 

• VA home loans do not require a down payment, unless the purchase price is more than the appraised value or in excess of $240,000.

• VA home loans have a negotiable fixed interest rate that is competitive with conventional mortgage financing.

• VA home loans have limitations on which closing costs may be assessed to the veteran.

• VA home loans have long amortization (repayment) terms

• VA home loans may be prepaid without penalty.

• VA home loans may have forbearance extended to worthy VA homeowners experiencing temporary financial difficulty

• VA home loans do not require mortgage insurance premiums.

• The seller may pay ALL of the veteran's closing costs (and with a $0 down payment, the veteran can literally purchase a home for nothing).

Negative consequences of VA home loan financing: 

• VA home loans require the veteran (or the seller) to pay a funding fee.  If this fee is wrapped on top of the loan and the veteran finances 100% of the property, the veteran will be "upside down" on the home (meaning he or she owes more than the property is worth).

• Higher loan amounts reduce the available equity position of the veteran which could hamper selling the property within the first five years of ownership. In other words, if the veteran had to sell the home, there may not be a margin of equity to cover the closing costs on the sale of the property, any real estate commissions owed to a listing agent, and any other costs associated with the sale of a property. (This does not factor in any appreciation in the value of the home over this period of time).

• Co-borrowers are restricted to qualifying veterans and spouses of qualifying veterans only.

• The Department of Veteran Affairs will have access to your personal and financial records obtained during the loan process.

In the opinion of most people out there, the advantages definitely outweigh the disadvantages of choosing a VA home loan, especially when you can purchase a home for $0 down, have the seller pay for all of your closing costs, and move right in!