Loans are necessary assets that can be extremely valuable at specific life events. People usually don’t enjoy taking out loans, but when critical needs arise, a loan is the best option to meet those needs.
On the other hand, taking out a loan always entails meeting specific requirements, which vary from lender to lender. Some lenders impose obnoxious, terrifying, unfriendly, and unrealistic terms, whereas others offer very reasonable and affordable loan terms.
When you are a veteran in the United States, it is even easier to obtain a loan, which comes with numerous benefits.
This article discusses the 10 advantages of taking a VA loan, especially for those in Honolulu, Hawaii.
In no particular order, the following can help you understand VA home loan benefits.
The Issue of the Down Payment
Many lenders will not make loans unless the borrower provides a portion of the down payment. Borrowers consider some down payment requests to be excessive. One of the advantages of obtaining a VA loan is that it may only require a small percentage of the down payment, if any, as long as the sales price does not exceed the loan’s appraised home value. Veterans can use VA loans with little or no down payment to meet their housing, health, education, and other needs.
Favorable Credit Requirements
The VA loan is the best option for veterans, especially because it is backed by the United States Department of Veterans Affairs. The implication is that VA lenders can make VA loans available to veterans with little or no credit history and low credit scores, making VA loans the most flexible credit option compared to others, such as FHA loans. This is possible because the United States Department of Veterans Affairs has set a lower credit score limit and other restrictions for veterans seeking VA home loans.
Flexible funding fee
In loan processing, the funding fee can be a significant issue. On the other hand, getting a VA loan comes with a lower flexible funding fee. This VA funding fee covers a variety of costs, including the cost of running the loan, including paperwork, a percentage of less than 3.6% that goes into the coffers of the United States Department of Veterans Affairs as a means of recovery for VA loans that have gone into foreclosure, and other funding fees.
So, by taking out a VA loan, you gain the flexibility of paying for the VA funding fees, which can be paid at the end of the loan deal or added to the loan repayment amount without you having to pay them out of pocket.
No Prepayment Penalties
If you pay off your mortgage loan early enough, you may incur a prepayment penalty. This means that your lender has established a time and payment schedule for you that spans a period of time. Some lenders charge a prepayment penalty if you repay earlier than the agreed-upon period. A VA-approved lender, on the other hand, does not impose such a penalty. You enjoy paying off your loan early without incurring any prepayment penalties.
Evaluating all these benefits together, they point to one conclusion: easy qualification for a VA loan. When there is little loan history required, a low credit score is considered, a flexible down payment is made available, and other factors, it is simple to qualify for a loan. All of this is incorporated into the VA loan program, making it simple for borrowers to qualify for a loan.
We previously discussed how the United States Department of Veterans Affairs backs the VA loan. Although this department does not provide VA loans, they collaborate with private lenders who do. In other words, VA loans are backed by the government through the department, which guarantees the loan as a benefit to veterans or borrowers.
No Private Mortgage Insurance
It’s upsetting when a lender requires private mortgage insurance before you can be approved for a loan. This is common practice among lenders. The process can be tedious and time-consuming even if you have mortgage insurance. A VA loan, on the other hand, does not require private mortgage insurance before your loan application can be considered because it is backed by the government.
Another good option that will make you appreciate a VA loan is that it is assumable. Not all lenders offer this option, but it’s worth considering a loan from a lender who takes assumptions into account. The assumption allows another person to take over your loan if you want to get out of the mortgage. You can choose to leave the home you purchased with the mortgage and hand it over to another person, who will now take over the loan repayment and meet other requirements until the mortgage is closed.
Low Debt-To-Income Ratio
Most loans (conventional/FHA/USDA) cap your max debt-to-income ratio, depending on the scenario it may range from 33% – 49.99%. However, VA lenders may be more generous and do not cap or restrict lending to any particular debt-to-income ratio but rather household residual income. This means in some instances you could go well above and beyond the 50% DTI threshold
Lower Closing Cost Limits
On the other hand, the VA loan limits lender’s fees and makes them more bearable for veterans and borrowers. For example, the United States Department of Veterans Affairs opposes unnecessary charges such as attorney fees, settlement fees, mortgage broker commissions, etc.
So if you want to take a VA loan in Honolulu, Hawaii, and enjoy all the stated VA loan benefits, Smart Money can help. We have helped thousands of VA families secure a VA home loan. Call us today at (808) 447-1850.