3 Ways A VA Mortgage Can Help You Save Money
Posted on: 28 July 2019
A VA mortgage is a loan program specifically for active duty military members, veterans, and certain members of the National Guard and military reservists. The VA loan is backed by the Department of Veterans Affairs, and this federal guarantee permits lenders to offer a slew of benefits that make a VA loan an attractive option. Check out a few ways you can save money by using a VA mortgage to purchase your home.
1. VA Loans Don't Require Private Mortgage Insurance (PMI)
A key difference between a VA loan and a conventional mortgage is that you don't have to pay PMI on a VA loan if your down payment is less than 20 percent. With a traditional mortgage, you have to pay PMI each month until you pay your loan balance down to 80 percent of the original amount. Then, you can request that the lender remove the PMI.
PMI ranges from 0.5 to 1 percent of your loan amount. Assuming you take out a home loan for $200,000, this results in a total annual cost between $1,000 and $2,000. When you utilize a VA mortgage, you're able to forgo this additional expense and keep more money in your bank account.
2. Loan Fees for VA Mortgages Tend to Be Lower Than Other Alternatives
Nearly every type of mortgage has some type of loan fee. These loan fees can add thousands of dollars to your loan costs. Though VA loans do have some fees, these fees tend to be lower than traditional mortgage fees. You can pay the fee out-of-pocket, or you may opt to roll the fee into your mortgage if you prefer to keep more cash on hand.
The exact amount of your VA mortgage fees varies depending on a few different factors, like whether this is your first VA loan, the amount of your down payment, and your current military status. Some individuals disabled due to their military service may be exempt from paying the fee.
3. There's No Down Payment Required for a VA Loan
Another benefit of a VA mortgage is that you're not required to make a down payment on your home. Assuming a five percent down payment and a mortgage of $200,000, this lowers your home-buying costs by a whopping $10,000, enabling you to purchase a home sooner rather than later.
If you want to make a down payment, it's perfectly acceptable to do so. Making a down payment is one to lower the cost of your VA loan funding fees. Some home buyers opt to make down payments so that their mortgage amount is smaller, while others prefer to keep their cash on hand for other financial goals. For more information, contact a VA mortgage loan lender in your area.
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