Wednesday, June 8, 2016 - Article by: Mortgages for America -
Millions of military homebuyers all across the country take advantage of the benefits of a VA home loan. Benefits such as no mortgage insurance, lower credit thresholds and lower interest rates are all attractive options for current and former military personnel and their families.
But perhaps the most attractive VA loan benefit is the zero down payment option. Active duty and veteran military have the option to put no money down on the purchase of a home without having to pay the mortgage insurance premiums that come with similar FHA and conventional mortgages.
But just because you choose a VA home loan doesn't mean you aren't allowed to put money down. In fact, there are many cases in which it is beneficial for VA borrowers to put money down. Here are a few:
Reduced VA funding fee
In order to keep the program alive and well, VA home loans come with an upfront funding fee, which can be financed into the loan amount. With no down payment, this funding fee is 2.15 percent of the purchase price. This fee can be higher for National Guard of Reserves, or for Vets using their benefit for a second time. However, a down payment can reduce this fee. With as little as five percent down, the fee drops considerably. According to the VA, about 12 percent of all VA borrowers make some sort of down payment. It's important to note that this funding fee is waived for Veterans with service-related disabilities.
Increased chances of approval
While more lenient in terms of qualification, even VA loans require a strict approval process. The borrower must still prove they are able to make the monthly mortgage, tax and insurance payments. Coming in with a down payment of any amount can help the approval process greatly and allow the Veteran to qualify for a bigger house.
Reduced monthly payment
If you're lucky enough to have the financial wherewithal to make a down payment, the question becomes, how much? Like any mortgage, the more money you put down, the lower your monthly payment and the less amount of interest you will pay over the life of the loan. Also, most lenders will offer lower interest rates to borrower with cash for a down payment, as the risk of default goes down significantly with higher down payment.
So while the no-down-payment option is one of VA's most attractive benefits, there is an upside to continuing to save before you buy. For a free consultation or to see how much you qualify for, call us today at (888) 320-7888.
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