The PROs and CONs of VA

By Joe L. Fisher

tHE PROs And COns Of

vA HOmEOwnERsHIP fOR vEtERAns

The demand for VA home loans has recently been on the rise as many service members faced with tough credit and down payment requirements choose VA loans as their suitable home financing option. We cannot hide or deny the extreme attractiveness of VA loans, especially for veterans. In 2020, the number of military members who took advantage of the VA loan programs was reported to have expanded rapidly. According to Forbes, more VA-backed loans originated in 2020 than in the two previous fiscal years combined, totaling more than 1.2 million loans.

However, as with any loan option or anything else in this world, VA home loans have their pros and cons. It’s just part of the game. It’s best that you remain aware of these pros and cons if you’re to make an informed decision. Let’s have a look.

PROS OF vA HOME LOANS.

To begin with, VA-backed or VA home loans require no down payment. This means that eligible borrowers can borrow as much as the lender is willing to give without putting a penny down. How does this happen? When the VA backs a loan, it means they insure a part of the loan. This means that in case you default, the VA covers the portion they had insured. This gives lenders more confidence, and in return, they’re able to offer more favorable terms such as no down payment to eligible borrowers.

VA home loans also require no private mortgage insurance (PMI) from eligible borrowers. This is simply because the Department of Veteran Affairs or VA insures home loans to eligible veteran borrowers. Normally, PMI is required for

conventional borrowers who are not in a position to put down at least 20%. For conventional borrowers who afford to put down 20% or more, or those with a 20% equity in their homes, PMI is not required. Requiring no down payment and no PMI, the VA home loans come with significant benefits to eligible military borrowers.

Additionally, VA home loans offer two refinance options that can help eligible veteran home buyers reduce their monthly payments or get cash back from their equity. The first one is the Interest Rate Reduction Refinance Loan (IRRRL), which is designed for home buyers with existing VA loans. The second one is the VA CashOut Refinance which allows existing VA and non-VA homeowners to refinance their mortgages and get cash at closing to pay down debt or cater for other expenses and needs.

Another advantage of VA home loans is that they are flexible with bankruptcy and foreclosures. Typically, bankruptcy and foreclosures can crush one’s credit score and overall financial health. However, bankruptcy and foreclosure don’t automatically disqualify a borrower from getting a VA loan. After being declared bankrupt or having experienced a foreclosure, you’re required to wait for two years to be eligible for a VA home loan.

Lastly, on the pros of VA loans, there is no prepayment penalty. Yes. You can fully settle your VA loan early with no worry of attracting any prepayment penalties. This is unlike other conventional loans.

vA HOME LOAN CONS.

First, VA home loans or programs are not for everyone. The program is a loan one must earn, and this makes it extremely rare to acquire compared to other loan options. VA home loan programs are only eligible to service members, including veterans, active service duty members, and those serving in a National Guard or Reserve who have served or are serving in the US military. The programs are also eligible to surviving spouses of veterans, the spouses of veterans who are missing in action, or those held as prisoners of war. Besides these, the veteran or the spouse must meet the basic service requirements set by the VA, have a valid Certificate of Eligibility (COE), and meet the lender’s credit and income requirements.

Secondly, all VA home loans come with a mandatory VA Funding Fee, which is meant to help keep the VA home loan program alive for future generations and goes directly to the agency. However, eligible borrowers with service-connected disabilities are an exception. The fee is something that you’ll not find in other conventional loans, although it’s for a good cause.

Moreover, VA home loan programs are only designed for primary residences. This means that you can’t use a VA loan to buy your second home or investment property. Service members who qualify for the loan have to certify that they intend to personally occupy the property as a primary residence and the VA gives the eligible borrowers a “reasonable time” of up to 60 days from the closing date to occupy the home.

Lastly, some home sellers are never open to the idea of accepting offers from VAbacked borrowers. However, this majorly has a lot to do with some of the myths and misconceptions surrounding VA loans. Some people rumor that VA loans have too much government red tape, while others believe that VA loans take forever to close, which are all false statements.

With both sides of the coin now shown to you, you’re in a better position to make an informed decision. It’s time to live the American dream of homeownership.

Work cited.

https://www.veteransunited.com/valoans/va-loanpros-and-cons/

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