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"Just bring us your mortgage and we will refinance it for pennies on the dollar." We have all heard these claims made on television commercials and infomercials. There are so many types of loans out there today that it is hard to decide what kind of loan you need. If you believe what you hear from the television commercials, there are loans to be had at percentage points below the standard rate. To top it all off, many of them make it sound like there is no qualifying to go through. If that is the case, why would I get a VA Loan?
Guaranty First of all, the Veterans Administration does not loan money for purchasing a home. The VA functions more like an insurance agent in this case. What they provide to veterans is the backing of the Government of the United States on the loans that traditional lenders offer. In other words, they guarantee lenders that they will receive up to the entitlement amount in the event of default. It is more of an enticement than it is a loan.
No Down Payment!
In most cases, veterans taking advantage of a VA Loan will not have to put up any money for a down payment. We all know that this can be a huge advantage when it comes time to close on your loan. As is always the case, if you can put up some money for a down payment, you will pay less over the life of the loan because you have reduced the principal.
PMI – Private Mortgage Insurance
Just when you think you know how much your monthly payments on your new home are going to be, you find another $40 - $50 – or even $60 added in. What in the world has happened? You have been introduced into the world of private mortgage insurance. Lenders do what they can to protect their investment by requiring you to take out an insurance policy on your loan. You don't have to worry about this "hidden" cost on a VA home loan because the Veteran's Administration is the guarantor for the loan.
Why VA?
A guaranteed loan with no down payment and no PMI fees – what's not to like? |
