Benefits of VA Loan vs. Other Mortgages

posted 6/10/2015 in Mortgage

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Benefits of VA Loan vs Other Mortgages

Few loans are as powerful and versatile for veterans and their families as a military VA loan. Active military personnel, reservists and military veterans should not overlook taking advantage of this hard-earned benefit if they are considering a home purchase, refinancing a current VA loan or making certain kinds of home improvements.

Why are VA loans more attractive than other conventional or USDA loans? While both VA loans and conventional loans are obtained from private lenders, the government guarantees VA loans so lenders have less risk. The guaranty gives lenders confidence and in turn helps them to provide service members with great terms and low rates.

Unique VA home loan benefits include:
  • Lower Closing Costs - Since the VA limits the kinds of closing costs a borrower can pay, these costs are often lower for the borrower than for conventional loans.
  • No PMI – Because the loan is backed by the government, VA loans do not require the borrower to pay private mortgage insurance (PMI), which lowers monthly payments significantly.
  • Home Financing Flexibility - VA home loans can be used for a home purchase, refinancing or certain home improvements.
  • Continuing Financial Support - Counseling and assistance is available to veteran borrowers having financial difficulty or those who are facing default on their loan.
  • Multi Use Benefit – The VA loan program is not just for first time home buyers. As a veteran, you can use this benefit multiple times as long as you pay off the loan each time.
Additional Benefits for Disabled Vets
Although VA loan holders are not required to pay PMI, the VA applies a funding fee to every purchase and refinance loan it backs. The VA uses these fees to help fund the program. For first time benefit users, the funding fee is generally 2.15 percent of the purchase price. The buyer or seller can pay the fee in cash, or it may be financed in the loan amount.
However, military veterans with a disability rating of at least 10 percent are exempt from paying the funding fee. This also includes veterans rated eligible to receive disability compensation due to a pre-discharge exam or review. Veterans on active duty who are entitled to receive disability compensation are also exempt.

Refinancing Advantages For Vets
For veterans who already have a VA loan but are interested in refinancing to a lower interest rate, the VA offers the Interest Rate Reduction Refinance Loan (IRRRL). With this program you can lower your interest rate by refinancing your existing VA loan. No credit underwriting is required, there is no requirement for a home appraisal and you may be able to refinance with no money out of pocket by including your closing costs in the new loan. Similar to home purchase loans, these loans are obtained through private lenders and guaranteed by the VA.

Finance Home Improvements with VA Loans
There’s more to home ownership than just your monthly mortgage payment. Poor energy efficiency can also have an impact on your pocketbook. While the VA loan program does not offer traditional home improvement loans, it does offer financing to help pay for VA approved energy-saving features. These improvements include solar or heating/cooling systems, water heaters, insulation, weather-stripping/caulking, storm windows/doors and other energy efficient improvements.

Let Lincoln Savings Bank help you find your next home with confidence, knowing you are ready to buy when the right home appears. If you think a VA loan may be right for you, you can start the mortgage process online in just a few minutes at no cost to you by visiting our Mortgage Launchpad.

If you prefer personal assistance rather than online help, you can contact us at one of our many Iowa locations and one of our mortgage experts will be happy to answer your questions.

Lincoln Savings Bank, Member FDIC, Equal Housing Lender
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