When it comes to finding a home for you and your family, getting the best possible mortgage sets you up for success. For those who are eligible, a VA (Veteran’s Administration) mortgage loan offers a number of enticing benefits that may make sense for your home purchase. Here are some of the biggest advantages of VA loans:
1. No money down required.
Coming up with a large down payment is a huge barrier for many homebuyers. For a $200,000 home, a standard 20 percent down payment is $40,000. That’s a lot of money for most families to save up. With a VA loan, so long as the purchase price doesn’t exceed the appraised value of the home, no down payment is required.1 A VA loan can eliminate the down payment barrier so you can get into a home sooner without having to save up a large amount of money.
2. No private mortgage insurance (PMI) required.
With traditional loans, if you require financing for more than 80 percent of a home’s appraised value, you’ll most likely be required to pay PMI monthly, which protects the lender if you default on the loan. This can cost many borrowers an extra $100 to $200 a month. VA loans don't require PMI even when receiving a loan for the entire appraised value of a house. Navy Federal offers several other mortgage products that also don't have a PMI requirement.
3. Strict limits on closing costs.
Closing costs for traditional mortgage loans can add up quickly, but with a VA loan, strict limits are imposed on what closing costs are allowed.2
4. Lower interest rates.
Because VA mortgages are partially guaranteed by the VA, lenders are encouraged to offer more favorable terms than conventional loans. This can often translate into lower interest rates than those for conventional mortgages, which lower your monthly mortgage payment and save you money in the long term.
5. Qualifying minimum credit scores may be lower.
The VA doesn’t set a minimum credit score requirement, although many VA lenders have guidelines for minimum credit scores for qualification. Your lender may look past your credit score to see your unique financial situation to help get you the best VA loan possible.
6. No prepayment penalty.
Traditional mortgages may penalize you for paying off your loan early, but with a VA loan, there’s no penalty for eliminating your mortgage ahead of schedule. If you’re able and decide that you want to pay off your mortgage, you’re not forced to keep unnecessary debt.
Ready to get started on your path to homeownership? Get preapproved for a mortgage that fits your needs and goals today. Navy Federal Credit Union is here to help you with your homeownership journey.
1Product features subject to approval. 100% financing loans may include an additional funding fee, which may be financed up to the maximum loan amount. Available for purchase loans only.
2Navy Federal VA loans are subject to a 1% origination fee.