When you are looking for the best, lowest mortgage rate, the VA home loan is where it’s at. The VA loan program is the most powerful home loan program on the market for many veterans, service members and military families (Active Duty, Retired, and Disabled). These flexible, government backed loans are offered with significant benefits that open the doors of home ownership to veterans who might otherwise grapple (or not) to obtain a mortgage on a new home purchase.
VA loans feature competitive rates and terms to qualified borrowers with little to no money out of pocket. According to Ellie Mae, VA mortgage rates continuously beat conventional rates by 25 basis points (0.25%) or more on any given day, with gaps as wide as 150 basis points for some borrowers with less-than-perfect credit scores. March marked the 23rd month in a row in which VA mortgage rates being lower than conventional rates. Astonishing!
Not only do you save on rates and payments, but you also save on mortgage insurance too! In contrast to conventional loans, VA mortgages never require mortgage insurance (PMI), regardless of the down payment, making overall borrowing costs significantly lower with VA loans.
Worried about getting approved? Don’t be. If you are shopping for a VA loan you will see that not only are mortgage rates low, but lenders are approving mortgage applications more than usual. Since earlier in the decade, lenders have been loosening their guidelines and approving home loans more aggressively.
Still trying to decide if a VA loan is best for you? Here is a recap of the benefits as well as some additional tidbits to help educate you on just why you should absolutely take advantage of this benefit offered if eligible.
1. VA loans can be used for either a purchase or refinance of a home. Because the Department of Veteran Affairs guarantees the VA loan against loss, mortgage lenders can make lower interest rates available to VA loan applicants.
2. VA loans allow for 100% financing. There is no down payment or mortgage insurance requirement.
3. A VA loan is also assumable, which means that a VA home can be sold with its VA financing attached. In the future, having an assumable loan at today’s rates makes selling you home very attractive to a buyer in the market.
4. You will have access to the Interest Rate Reduction Refinance Loan (IRRRL). This program allows you to refinance (without verification of credit) into a lower interest rate as well as convert an adjustable rate mortgage into a fixed rate mortgage. Not even a home appraisal is required to get approved! These are incredible features otherwise not available in the mortgage industry.
5. Basic Allowance for Housing (BAH) is a significant benefit to qualified active military members. Lenders can count your BAH as effective income, which means you can use BAH to pay some or all of you monthly mortgage costs! BAH varies on pay grade, your geographic location and number of dependents.
6. No Prepayment Penalty! A VA loan allows borrowers to pay off their home loan at any given point without having to worry about penalties for doing so. With the absence of a prepayment penalty, borrowers are free to consider future home purchases or refinancing options!
In 2015, a total of 631,142 home loans were guaranteed by the VA, the largest year in the history of the program! The success has been felt nationwide as VA purchases and VA refinanced loans increased in all 50 states.
The VA loan continues to be a lifeline for Veterans and military families looking to achieve the dream of home ownership!