When it comes to getting a mortgage, VA loans can be a great option for active-duty service personnel, National Guard Members, reservists, veterans and certain categories of spouses. With looser credit restrictions than other home loans (e.g. no down payment for loan amounts up to $417,000, no mortgage insurance, limitations on closing costs, etc.), a VA loan might be exactly what a military home buyer needs to break into the real estate market.
In addition to the benefits listed above, a VA loan brings along additional advantages, among which the four most important ones are:
- Favorable terms and conditions. Although VA loans aren’t issued by VA directly, VA guarantees a portion of the loan against potential loss, up to a certain amount (guaranty entitlement). This encourages lenders to offer borrowers more favorable financing terms and conditions, such as lower interest rates and longer repayment periods. If a borrower is unable to make his monthly mortgage payment, a VA loan technician will explore upon request the financing options available to that person. To help borrowers avoid foreclosure, loan technicians work with lenders to adjust monthly payments and repayment schedules.
- The guaranty entitlement can be used multiple times. Guaranty entitlement represents the amount guaranteed by the VA to protect a lender against loss in case of default. Whether a borrower uses all or part of his entitlement, he can get that entitlement back to purchase another property if he repays the loan in full without selling the property (one time only), if he sells the home and repays the loan, or if the buyer, who is a member of the military, assumes the existing VA loan and substitutes his entitlement for the entitlement amount previously used by the military seller. If the person assuming the VA loan isn’t a member of the military, the seller can no longer use his entitlement until the loan is paid in full. When a borrower defaults on the loan, the entitlement amount used can be restored only after he covers the financial loss suffered by VA to reimburse the lender.
- No pre-payment penalties. A VA loan can be fully or partially paid without pre-payment penalty, which will save the borrower a boatload of interest. As well, the repayment term can be extended to reduce the monthly payment, but it cannot exceed the maximum repayment period permitted for VA loans. Another essential aspect is that, although a military homeowner can sell his home to anyone who agrees to repay the existing VA loan, he won’t be released automatically from his liability for the repayment of the loan. In this case, the seller must notify the lender or VA, which will approve the buyer who intends to assume the loan only if he meets certain eligibility requirements.
- Versatility. A VA loan isn’t just the best type of mortgage a military member can get to buy a home. This type of loan can also be used to build a home, buy a residential condominium or a manufactured home with or without a lot, simultaneously purchase and improve a home or a condo, refinance existing VA and non-VA loans, and access energy-efficient weatherization improvements, such as solar cooling systems.
If you intend to buy a home in the beautiful Sunshine State, and you’re a member of the military, contact our team today at North Florida Mortgage. One of our qualified VA loan officers will be glad to discuss your loan application along with your specific financial needs and offer you the most convenient VA loan terms and conditions available on the market.