VA Loans and its Advantages

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The Department of Veterans Affairs has no specific amount imposed as a maximum loan for VA mortgages.  But, the VA guaranty amount varies with the size of the loan and the location of the property.  The borrowers do not need to make a down payment because lenders are able to obtain guaranty from VA.  The Veterans Association will guarantee 25 percent of the principal loan amount, up to the maximum guaranty and the maximum guaranty varies depending on the location of the property. 

VA loans offer advantages over non-VA loans.  It can help you save your money and you have the greater chance to be approved because of its easy-to-comply requirements.  It is suitable for first time home buyers.  The following are the advantages of VA loans.

•1.     No down payment.  The loans have no up-front or out-of-pocket expenses because it doesn't require a down payment and the seller is allowed to pay the closing costs for you.


•2.    No Monthly Mortgage insurance.  Because the VA guarantees the VA loan, there is no need for mortgage insurance.


•3.    Low interest rate.  VA loans have lower interest rates compare to non-VA loans.


•4.    No out-of-pocket closing costs.  On a non-VA loan, you pay miscellaneous up-front fees, such as for processing. The fee can be as much as  3% of the total amount of the  loan. But on a VA Loan, you pay any out-of-pocket closing costs because the VA allows the seller to pay them for you.


•5.    Assumable mortgage.  You can transfer your mortgage to someone else under VA loan.  Upon transfer, they will assume your mortgage.  Thus, it can help you sell your home especially if the interest rate on your mortgage is less than the current interest rate.


•6.    Adjustable-rate and fixed-rate loans.  You may choose between Fixed and adjustable rate that suited your budget.

Fixed rate Mortgages are the most common mortgage for first-time home buyers because they are stable.  The monthly mortgage payment remains constant for the entire term of the loan, whether it is a 15-year, 20-year or 30-year mortgage.  It allows buyers to predict the monthly housing cost throughout the loan term.

Adjustable-Rate Mortgages are popular because they start with a lower rate and lower payment compare to others.  However, the interest rate can change throughout the life of the loan.  All ARMs have adjustable periods that determine when and how often the interest rate can change.

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