As with any mortgage loan option, there are advantages and potential disadvantages to VA loans. However, VA loans are an optimal home financing option for eligible veterans, active-duty members, or a qualifying spouse. Here we will examine some VA loan pros and cons to help you make beneficial decisions when choosing your mortgage.
Pros of VA Loans
No down payment required
This is one of the biggest advantages of a VA loan. VA loan applicants can borrow as much as a lender is willing to lend while putting $0 down. Other loans, like FHA loans, will usually require a minimum down payment amount of 3.5 percent.
No private mortgage insurance
Typically other common loans will require private mortgage insurance when a borrower does not put 20% down at closing. However, VA loans never require private mortgage insurance, no matter the 0% down payment.
Easier credit check (no min. score & lower interest rates)
Another pro is that the Department of Veterans Affairs does not set a minimum credit score for the VA loans it guarantees. This assures that lenders assess the full profile of the applicant rather than basing qualification on minimum credit score requirements.
No prepayment penalty
With VA loans, the borrower has the freedom to pay off the mortgage early or make additional payments without the possibility of being penalized for it. Again, with FHA and conventional loan products, prepayment penalties are a possibility. For VA loan borrowers, this can help with saving money in the long run.
Cons of VA Loans
For primary residences only
VA loans are intended for borrowers buying primary residence homes only. Therefore, if you are looking to buy a second home or investment property, this loan option is not applicable.
VA funding fee required upfront
The VA Funding Fee is a common fee VA borrowers will be required to pay upfront. This helps keep the program up and running.
Limited to those eligible
Obviously, a con of this loan product is that it is only applicable for veterans and their spouses. This means that there is limited eligibility and that the program is not open for many borrowers.
Conclusively, VA loans carry many benefits, and it is important to consider any financial challenges that come with it. Direct Mortgage Loans is a qualified VA loan lender. Download our app to start your loan process today!