VA Home Loans: The Good and the Not So Good

Small House

Thanks to its flexibility and provisions, qualified veterans would probably see VA home loans as the best choice. This program is quite attractive because it comes with significant benefits that only eligible borrowers can enjoy.

But like any other mortgage option, there are bound to be ups and downs. This could help you make a decision especially if you are currently considering your options for a home loan. It pays to weigh the pros and cons before you make a decision and to see if this is the option that works for you.

Find a loan that fits your financing needs.

The Good

Zero down payment
Perhaps the best giveaway for a VA home loan is there’s no need to give a down payment. FHA loans probably have the lowest down payment minimum but for eligible veterans, having no down payment is definitely a better deal.

Higher benchmark for debt-to-income ratio
It’s a known fact that for conventional loans, qualifying could be a little hard if you have a higher DTI ratio. But for veterans who wish to apply for a VA home loan, DTI ratio higher than 41% can still secure financing.

Refinance Loan Options
Home loan programs under the VA isn’t strictly for purchasing only. For those who are seeking to refinance loans, there are two options. One is the VA Interest Rate Reduction Refinance Loan or IRRRL and the other is the VA Cash-out Refinance.

The Not So Good

Eligible properties are primary residences only
If you’re looking at possible investment properties, perhaps VA home loans are not for you. This benefit is eligible for those looking for a potential residential property.

It comes with a mandatory VA Funding Fee
Every VA home loan comes with this compulsory fee. The VA Funding Fee is intended to ensure the program’s existence for generations to come. But while this is an extra cost, this can be rolled into the mortgage.

The funding fee increases if you are like to reuse this benefit
Yes, qualified veterans can reapply for another VA home loan but the funding fee becomes higher than your first time. Usually, first-timers have a 2.15% funding fee. But for subsequent borrowers, this increases to 3.3%. If you’re not too big on extra costs, this could be a downside.

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