VA home loans are one of the most popular financial plans for veterans. It comes with several benefits like reduced interest rates and allows for zero down payment. While it might seem like a no brainer that you have to use a VA loan when you qualify, there are exceptions to consider.
This article looks into the instances to consider the loan and when not to go for it.
When to Use the VA Loan
Like any other time, you only consider a loan if you cannot afford the property at the moment. It, therefore, implies that you only have to find the VA home if you can’t afford the property at the time of purchase. Other than not providing the property, the loan allows you zero down payment. If you don’t have the down payment, then VA loans are a great option. Buying the house without the down payments comes in handy in helping you build equity faster.
The VA loan is also a great choice if you are looking to spend less on loan processing. The closing costs of VA loans are generally lower compared to the other conventional loans. In some cases, the lender will provide the closing fees on the VA loans. With the ability to provide up to 100% financing, VA loans also help you avoid servicing different loans at the same time. You get to save the closing costs and other services on various loans.
The other VA home loan benefit is that it does not require stellar credit history. If you have a poor credit history, then consider a VA home loan. VA loans also come with Interest Rate Reduction Refinance Loan (IRRRL) that allows for refinancing the existing mortgage with one of lower interest rates.
The VA loans are lenient on disabled applicants as it exempts them from the upfront funding fee. This makes VA loans the best option for disabled eligible applicants.
When NOT to Use VA Loans
With the several benefits that the VA loan comes with, it might seem insane not to consider it. There are times when it makes sense to use conventional loans compared to VA loans. The first case is based on the type of property you are purchasing. VA loans are only limited to primary residential homes. If you are purchasing a commercial or investment property, you are better off looking for an alternative.
Taking a second VA home loan is also quite expensive. The subsequent loans come with higher funding fees rivaling the costs of the other regular loans. The VA loans also come with limits for different states that make it almost impossible to purchase an expensive property. Lastly, do not consider using the VA loans if you have enough down payment. With over 20% of the down payment, you are better off with the regular loans as they are considerably cheaper.
Even though VA loans look at the ultimate financial tools, there are several considerations before taking it up. Only use if you don’t have enough down payment, have a bad credit history, or purchasing an inexpensive primary residence.