Examining the Benefits of VA Loans
If you are a Veteran, a current service member, or a family member of a Veteran, then you have probably heard of a VA home loan. These loans, which get their name because they are backed by the U.S. Department of Veteran Affairs (VA), offer a fantastic opportunity for service members to save money on a home loan. That said, you might not understand all of the benefits associated with a VA loan.
In today’s blog, we will discuss the benefits of taking out a VA loan. If you think you may qualify for a VA loan in Georgia, then feel free to contact Local Mortgage. Our mortgage experts can help you determine if you qualify and find the best VA loan for you. We are licensed to work in Colorado and Tennessee as well!
The Purpose of VA Loans
By understanding the original purpose of VA loans, we can illuminate many of the benefits associated with them and help you determine if they are the right type of loan for your situation. Our Mortgage I.D. tool and our team of mortgage experts can also help you determine the best type of mortgage for your particular circumstances.
VA loans were created toward the end of World War II. As service members returned from the warfront, people began to realize that they might not have enough savings or financial history built up to qualify for the standard types of mortgages available. In order to remedy this situation and begin to repay Veterans for the sacrifices they made, VA loans were developed.
VA loans are not issued by the Department of Veteran Affairs. Instead, the VA guarantees the loans, meaning that they are backed financially. Due to the financial guarantee provided by the VA, Veterans are able to get a home loan even if they lack the usual financial standards necessary to secure a mortgage.
Following World War II, VA loans helped spur the economy. Since the genesis of the VA loan program, over 22 million loans have been issued. These loans gave people returning from the war the chance to secure assets that gave them a foothold in the economy. By making it easier for Veterans to get into their dream homes, they gave them the ability to focus on other things, such as providing for their families, starting businesses, and continuing to serve their communities.
Put simply, the purpose of VA loans is to make it easier for Veterans to secure a mortgage. By making this process easier, the VA helps Veterans build a solid foundation for their financial futures. It is also a fantastic way to give back to the people that have served our country.
Comparing VA Loans to Conventional Loans
The benefits of VA loans become extremely clear when they are compared to conventional home loans. As we noted in an earlier post, conventional loans are simply all mortgages that are not backed by a government entity such as the VA. Most of the mortgages issued in the U.S. are conventional loans.
In most cases, you need a down payment of at least 20% and a credit score of at least 620 to obtain a conventional loan. They are usually issued with a fixed interest rate and a term of 30 years. Moreover, conventional loans can have relatively high interest rates compared to other types of mortgages, especially if they are issued with a low down payment or to someone with a lower credit score.
In contrast to conventional loans, VA loans can be secured with a down payment of less than 20% while still not needing additional mortgage insurance. The credit requirements associated with VA loans are also less stringent than the requirements surrounding conventional loans. Similarly to conventional loans, VA loans are typically issued with fixed interest rates and 30 year loan terms. Those seeking VA loans may also check interest rates from multiple places to try to find the best interest rates possible.
VA loans often lack some of the other costs associated with other types of loans. For example, VA loans typically feature lower closing costs that other loans. The fact that they are easier to qualify for also saves Veterans time and money and gets them shopping for their dream home sooner.
FHA Loans vs. VA Loans
One type of non-conventional loan that is somewhat comparable to a VA loan is an FHA loan. FHA loans are mortgages backed by the Federal Housing Administration (FHA). Like VA loans, FHA loans allow individuals to secure a mortgage even if they fail to meet the typical requirements necessary to buy a house.
There are some key differences between FHA loans and VA loans, though. Of course, these two types of mortgages have different requirements to meet. VA loans are only available to Veterans, current service members, and some spouses to service members or Veterans. In contrast, FHA loans are available to those that meet the guidelines outlined by the FHA, which typically focuses on credit scores, down payments, and other facets of the borrower’s financial standing.
Moreover, FHA loans require borrowers to pay annual premiums for mortgage insurance. Mortgage insurance is not required for VA loans, which helps increase the savings over the life of the loan. Thanks to the competitive interest rates, low down payment, backing from the VA, and lack of a requirement for mortgage insurance, VA loans are an extremely affordable option for those who qualify.
Obtaining a VA Loan
Do you think you qualify for a VA loan? If so, then contact Local Mortgage to see if you can get in on the savings. We offer extremely competitive interest rates on VA loans. VA loans are an affordable way to buy a house in Georgia, and our experts can walk you through the process of obtaining one.