A VA loan is guaranteed by the US Department of Veterans Affairs. It’s often a good option for people who qualify because it can have a very favorable interest rate. However, this doesn’t mean a VA loan is always the best option for veterans. Before you go with a VA loan, take the time to carefully think about the benefits and disadvantages of this type of loan.
Pro: You Save a Lot of Money on Fees and Rates
You get extremely favorable interest rates and lower closing costs when you go with this type of loan. VA loans also don’t require borrowers to have private mortgage insurance, saving the cost of a monthly insurance premium. You could end up saving thousands of dollars by closing time and continue to save for years to come.
Con: You Have to Pay a Funding Fee
Though VA loans lack most of the traditional fees associated with buying a house, that doesn’t mean they’re completely free of fees. Veterans do have to pay a fee of somewhere between 1.5 and 3.3 percent of the total value of the loan as a funding fee. However, this isn’t quite as bad as it might seem, since you can fund the fee from the loan itself, and it may be lessened or removed depending on the circumstances of your service.
Pro: You Don’t Have to Pay a Down Payment
Even the most lenient of other types of home loans tend to require a down payment of at least 3 percent, and some loans may need a payment of up to 20 percent of the home’s total cost. The VA loan is very rare because you don’t have to make any down payment at all as long as the home’s price is equal to the appraisal. This lets you get a home even without having substantial savings, and it can be especially helpful if you’re buying a home in Irvine, which is an extremely popular location for home buyers.
Con: You May Have Some Limitations
Keep in mind the VA loan doesn’t give veterans the ability to purchase a huge home with no limitations. It can only be used on a property you plan to occupy, and the VA will only make a guarantee for 25 percent of the loan amount.
Pro: You Can Transfer and Reuse VA Loans
VA loans tend to be a lot more versatile than other types of mortgages. If you sell your home to another buyer who qualifies for a VA loan, the buyer can just assume your mortgage. This is a huge incentive for buyers, since your older mortgage rates may be a lot lower than current rates. Another option if you want to move to a new place is restoring your VA loan, which lets you use your VA entitlement again on a different home after paying it off or transferring it.
VA loans are a great home financing option, but they’re not right for all veterans. If you’re not sure which type of loan you should choose, make sure to work with a real estate agent in Irvine who understands the details of home financing. The professionals at Irvine Residential Living can help you find the home of your dreams and walk you through every step of the home-buying process. Reach out to one of our friendly agents today at 714-454-6304.