This past Memorial Day weekend, millions of Americans celebrated family, friends and country. Parades, fireworks shows and concerts paid tribute to the many men and women who have served the United States throughout our nation’s history.
Our appreciation for those who have dedicated their lives to their country shouldn’t be limited to just a few holidays, like Memorial Day or Veteran’s Day. One of the many ways the Department of Veteran’s Affairs celebrates service is through its VA Home Loan program.
Benefits of a VA loan
VA loans are among the most attractive loan options. With no required down payment and no need for private mortgage insurance, they are one of the most inexpensive options from an upfront cost perspective and offer competitive interest rates.
Borrowers of VA loans won’t be penalized for early payment, making paying down the loan convenient and simple. Additionally, should a borrower’s financial situation change and foreclosure becomes a possibility, the VA loan program will work with him or her to find an alternative solution to avoid foreclosure.
VA loans are too often overlooked
Though VA loans offer clear advantages for military and veteran homebuyers, the VA loan program is underutilized by those who qualify. According to the Department of Veteran’s Affairs’ Unique Veteran Users Profile FY 2017, 2.4 million VA users took advantage of the home loan guarantee. Meanwhile, 6 million utilized VA-provided health care and 4.5 million received compensation or a pension from the VA.
A survey conducted by the Iraq and Afghanistan Veterans of America, which included responses from 1,501 IAVA members, found that just 49 percent of respondents had utilized the VA home loan program. Meanwhile, 72 percent used the educational benefits provided by the VA, and 76 percent received disability compensation.
Though utilization rates for the home loan program are low, more people have used this feature in recent years. The Unique Veteran Users Profile found that, after a sharp decline around the time of the housing market crash, utilization rates have increased every year.
Data collected by the National Association of Realtors showed that fewer veterans use a VA loan than active-service military personnel. Just 54 percent of veterans said they used a VA loan, compared to 74 percent of active-service military who said the same.
VA loan or conventional mortgage?
When buying a home, it’s important to choose the right loan for you. With the benefits of no down payment required and competitive interest rates, a VA loan may be a cost-effective option for homebuyers who qualify for the program.
However, USA Today pointed out that different situations may call for different solutions. For example, ,VA loans can only be applied for a primary residence. If you’re considering purchasing a second or vacation home, you should seek out a low-cost conventional mortgage instead.
Additionally, some homebuyers strategically choose when they use their VA benefits. Military.com pointed out that, while you can use the VA loan benefit as many times as you want, there are limits as to when they can be used. Borrowers can take out their second VA loan as soon as the first property they purchased with the benefit is both paid off and no longer owned by the individual.
To learn more about VA home loan eligibility and whether it’s right for you,