5 Things Veterans Need to Know About VA Home Loans
VA Home Loans are one of the best mortgage options for veterans looking to buy a home in Texas or any other state. They are easier to qualify for as compared to conventional mortgage loans. Many first time veteran home buyers in Texas, however, don’t know all the advantages of VA Home loans. Moreover, a common misconception among veterans is that getting a VA loan is an arduous process. But, that’s not true. If you are a veteran and are looking for a home loan to buy your dream home, take few minutes to go through this post to learn what makes VA loans one of the best loan options for eligible home loan borrowers.
1. Lower Rates as compared to Conventional Loans
VA loan rates are typically 0.25 percent lower than conventional loan rates. VA loans also offer very low foreclosure rates which help reduce the risk for veterans buying a home for the first time in Texas. A lot of first time home borrowers in Texas, however, neglect the 0.25 to 0.5 percent difference thinking that it does not matter much. The fact, however, is that even a small difference in home rate of 0.25 percent can make a huge difference in a 20 or 30 year term loan.
2. No Down Payment or Mortgage Insurance
Most mortgage options such as conventional loans require around 3.5 to 5 percent down payment. A VA loan does not require veterans to pay a downpayment, and therefore, unlike most loans home loan borrowers, VA loan borrowers need not wait for years to save money for down payment. VA loans also do not require borrowers to pay mortgage insurance fees.
3. Lower Credit Score Requirements
VA loans are backed by the government. In case the borrower defaults the VA guarantees to pay the lender, a part of the borrowed amount. Lenders, therefore, have a lower credit score requirement as compared to conventional loans and other mortgages. Typically, a VA loan requires a credit score of at least 620. However, if someone has a credit score lower than that, they can consult a home loan consultant who can help them obtain a VA loan even if they fall short of the credit score requirement.
4. Helps Refinance Existing Mortgage
Apart from offering several perks, a VA loan can also be used to refinance your existing mortgage. It does not matter whether it ’s for a VA loan or any other type of loan. Homeowners with a VA loan can use the Interest Rate Reduction Refinancing Loan (IRRRL) option to get lower rates without using property appraisal or bank statements. The ‘VA streamline refinance’ option gives VA loan holders access to lower refinance rates whenever rates drop.
5. Funding Fee Exemption
For a VA loan, a funding fee is charged to pay for the cost of the loan processing and other related activities. The fee varies from 0.50 percent to 3.3 percent of the loan amount and depends on factors such as service history and the loan type. However, disabled veterans with a service related disability are exempted from paying the funding fee. Veterans eligible for disability compensation and who receive retirement or active duty pay need not pay the funding fee either.
These five reasons to choose a VA loan are just few of the many reasons why veterans must obtain a VA loan at the time of buying a home. If you are looking for a home loan, it is advisable to get in touch with a home loan consultant who can help you compare between the pros and cons of different home loans, before you apply for any.