If you're eligible for a VA loan when seeking a mortgage, it can be a great way to secure the financing you need to purchase a home. Here are a few things that you need to know if you're considering a VA loan.
You Must Buy Your Primary Residence
One mistake people make when considering a VA loan is thinking that it can be used to buy a second home or investment property. This is not the case when using a VA loan, since it is specifically designed for people that are buying the primary residence that you will be living in. Hopefully, this will not be an issue for you, and you'll have no problems qualifying.
In addition, don't assume that you'll be ineligible for a second VA loan when moving to a new home and you have previously used a VA loan. You can actually use a VA loan as many times as you want, just as long as it is going to be your primary residence.
You Will Receive A Lower Interest Rate
A big benefit of getting a VA loan is that it offers a lower interest rate than a traditional mortgage. If you're wondering why this is possible, you can thank the US Department of Veterans Affairs. This is because the VA backs all VA loans, which makes it a less risky investment for your mortgage lender. In return, they'll give you that lower interest rate. However, always shop around to make sure that you are getting the best deal since different lenders will offer different interest rates.
You Will Not Need A Down Payment
Don't have a lot of money for a down payment? That's not an issue with a VA loan, since you don't need to have a down payment to secure the loan. This makes homeownership very accessible for veterans, who may not have a lot of money in the bank after they finish serving their country. While having no down payment results in a larger loan and more interest paid, you can always make additional payments when you have the cash.
You Will Not Pay Mortgage Insurance
Many loans require you to pay mortgage insurance if you are providing less than 20% of the home's value for a down payment. You won't have this happen with a VA loan, which will not charge you interest no matter how much you pay upfront for a down payment. This can save you a ton of money over the life of the loan.