Understanding the Pros and Cons of VA Loans: A Brief Guide

VA Loans have become increasingly sought home financing option among veterans and active servicemembers - thanks to easy qualification and down payment requirements. Guaranteed by the US Department of Veterans Affairs (VA), these flexible loans come with significant financial benefits that are not available in standard mortgage programs available for civilians. However, like every other loan option, there are certain pros and cons of VA loans, and therefore, wishful lenders need to be aware of both, before they file their application. Let’s take a look.

Pros of VA Loans

1. Zero Down Payments

The VA home mortgage requires no down payment; saving consumers minimum 20 percent of the loan value as compared to a traditional loan. The ultimate goal of this loan program is to help American Military Veterans or their spouses, in the event of their death from a service-related cause, to receive long-term financing. They need not pay any down payment in the lack of private financing.

2. No Prepayment Penalty

Conventional home loan programs may involve unfavorable terms such as prepayment penalties while VA loans don’t have such terms. As a home loan borrower, you can pay off your VA loan early without any fear of prepayment penalty.

3. No Closing Costs

Besides the basic loan origination fee, the VA home loan borrower need not pay any closing costs. Some of the closing costs that borrowers need not pay include lender document fees, recording fee above $17, transaction coordinator fee, notary and broker fees, and termite inspection fees. The seller of the home can pay all of the closing costs and prepaid penalties; amounting to six percent of the sales price.

Cons of VA Loans

1. Mandatory Funding Fee

VA Loans carry a mandatory funding fee that borrowers need to pay directly to the US Department of Veterans Affairs. The VA funding fee refers to a set fee that is charged on every purchase loan or refinance. This fee varies if the military veteran already has a VA loan and making down payments for the same. Borrowers with service-related disabilities need not pay this fee.

2. Limited Number of Sellers

There may be a few sellers ready to sell their homes to VA home loan borrowers. One of the reasons behind these limited number of sellers is the stringent regulations of the department of Veteran Affairs. Another reason is buyers who are refinancing with a VA Loan may choose not to pay any closing costs, thereby forcing sellers to pay for them.

3. Funding Fee Increase

If you use your eligibility for a VA loan more than once, be prepared for an increase in the funding fee. Although you can use and reuse your VA mortgage benefit, after the first time, doing so becomes dearer for you. Let us take an example to understand this better. If you are a military veteran who buys a home with zero down payment and uses your home loan benefit for the first time, your funding fee is 2.15 percent. The funding fee, however, will be 3.3 percent if you use your home loan benefit for the second time.

Conclusion

If you qualify for a VA home loan program, you need to understand that the advantages of this type of loan greatly outweigh its disadvantages. If you are yet unsure about applying for this smart mortgage, it is prudent to get in touch with mortgage experts. However, before you hire an expert, make sure that you conduct a thorough research to verify their capabilities.

USDA Rural Development Home Loans in Texas: A Brief Guide

USDA rural development home loans are specialty mortgage that provide a way for families from low to very low income groups, to own a home in any USDA-designated rural area. In simple words, this loan is for those who wish to buy a decent, safe, modest, sanitary house, and use it as their primary residence. This program provides reduces their risk of approved lenders, by providing them a 90 percent loan note guarantee on every loan they offer to an eligible homebuyer. You can get financial support through this direct loan program as part of the USDA rural development in Texas. In fact, this loan is available across all the US states.

Eligibility to Apply for a USDA Loan

To apply for a USDA loan, applicants need to fulfill the following criteria:

1. Must meet income eligibility

2. Must be a US citizen or a non-citizen national

3. Must occupy the property as their primary residence

4. No instances of getting debarred or suspended from participating in federal                      programs.

5. Have capacity to repay home loan

6. Should purchase a property that fulfills all the program criteria

7. Should be willing to meet all the credit obligations in a timely manner.

Before you apply for this loan program, don’t forget to check the eligibility requirements carefully.

Income Eligibility

The USDA rural development Texas has levied a maximum income limit requirement in order to ensure that only people, who are in the moderate or low-income group get the benefits of this loan program. Wealthy homebuyers are not eligible for this loan. The income limit for applicants should not exceed 115 percent of the median income in the area.

Property Qualification

Prior to zeroing in on a property, it is best to check if the area where you live or looking for a property falls under the USDA designated rural areas or not. According to this program, only properties that are located in the eligible areas qualify for a Single Family Housing Guaranteed loan. In addition, it is mandatory that borrowers must occupy your chosen property as their primary residence. To check whether or not the area you are looking to purchase a property qualifies for single family housing guaranteed loan program, visit the official USDA website.

Last Few Words

Due to requirements that we just talked about, USDA loans are not ideal for everyone. They typically work best for people who intend to buy a primary residence in the USDA-designated rural areas. With the help of this loan program, these borrowers get the required financial support to buy their dream home. Should you wish to learn more about USDA rural development home loans, feel free to connect with one of our mortgage consultants for a no-obligation consultation.

Learn About the Refinance Options for a Veteran Home Loan

Veterans Affairs (VA) mortgages or Veteran Home Loans in Texas, Ohio, or in any other state of the US, have proven to be a boon for military veterans and servicemen looking to buy a home or refinance their existing mortgages. Low mortgage rates and stringent underwriting standards have resulted in an increasing demand for VA loans from refinancers. Refinancing with a VA home loan enables homeowners to refinance up to 100 percent of the home’s value, without having to pay for mortgage insurance. Let’s take a close look at what else is in store.

Low Interest Rate

Military homeowners who have an existing VA Home Loan can trim down their monthly payments or shorten their loan term through a streamline refinance program, better known as the Interest Rate Reduction Refinance Loan (IRRRL). This loan option is great for current VA loan holders who wish to realize significant savings; getting benefitted from lower interest rates.

One of the biggest merits of refinancing through the IRRRL is that it features little paperwork and often need little-to-no costs out of your pocket. Borrowers can easily roll closing costs into their total loan amount. A VA Loan also does not need a credit check or appraisal for refinances under IRRRL.

Refinancing your existing VA home loan through this program ensures borrowers to pay a lower funding fee that is typically 0.5 percent of the total loan amount. You can even add this to your loan balance. The IRRRL permits borrowers refinancing up to 100 percent of the home’s value.

Cash-Out Refinance

Cash-Out Refinance is an option for those with a current VA or conventional loan; looking to take benefit of their home’s equity to access cash for home improvements, pay off debt, emergencies, and other purposes. If you are a veteran with two mortgages and wish to refinance them into one loan, this refinancing option allows you to pay off first and second loans with a newly sanctioned loan. Maximum refinancers permit the homeowner to refinance up to 100 percent of the home’s value to pay off the old mortgages. Cash-Out Refinance is available to any qualified veteran homeowner, regardless of their availing an FHA, Conventional or USDA loan.

Remember

If you are a veteran and don’t have a VA home loan, you have the choice to refinance your conventional mortgage into a VA loan. If you apply to refinance a non-VA Loan into a VA loan program, the Department of Veterans Affairs considers it to be a cash-out refinance. The biggest advantage of this refinancing option is that it allows the homeowner to fully refinance the home’s value.

Conclusion

In most cases, refinancing a standard mortgage into a VA loan can indeed save you hundreds of dollars every month, allowing you to quickly recover the associated costs of refinancing. Besides, refinancing into a fixed rate loan from an adjustable-rate mortgage (ARM) gives you stability and surety concerning your monthly VA loan payments. If you wish to learn more, it is advisable to get in touch with a competent mortgage consultant.