Buying a home with a low income can be tricky and stressful. As mentioned in a previous post, there are several low- or no cost down-payment loan programs available to those living with a fixed income, or like so many people, living paycheck to paycheck. There is yet another option, this one specifically available to those currently serving in the armed forces, veterans, and military families.
This option is called a VA loan, and is available through the Department of Veterans Affairs. These government backed loans allow for greater flexibility in funding homes for service members and their families, giving them one less thing to worry about. One perk shared by the USDA loans and VA loans: No down payment. That can help save thousands of dollars at closing, which is always helpful when buying a new home. It’s even more helpful for service members and their families, who are frequently on the move; it’s hard enough to come up with a down payment when you’ve been in one spot for years, never mind the financial drain of packing up and moving every six months to a year.
Another benefit is that VA loans don’t require additional private mortgage insurance, or PMI. Because the government backs these loans, they take on the risk assumed by the borrower, in case of a default. Many conventional lenders insist on PMI unless the borrower can put at least 20% down, which is difficult for many veterans to do. No PMI means that more equity can be put into your house, which will save thousands over time.
In addition to the savings advantage of no PMI, a VA loan will often get borrowers a lower interest rate on the loan, anywhere from .5% to 1%. Since the government backs the loan with a guaranty, lenders have less risk to take on, and can offer those lower rates. Coupled with no PMI and no down payment required, and the savings add up fast! Better still, there are no pre-payment penalties with a VA loan, so you can pay down your mortgage faster without having to worry about those extra fees.
All these benefits are available to active service members, non-active service members, veterans, and their families. To find out if you qualify, speak with one of our mortgage experts today.