4 Big Ways VA Loans Can Save You Thousands

Military family with kids

VA loans offer a host of significant benefits, which can save you a lot of money down the road.

This historic benefit program helps open the doors of homeownership to veterans and service members who otherwise might struggle to secure home financing. VA loan volume has soared in recent years, with the Department of Veterans Affairs backing more than 1 million loans for the first time ever in 2020.

The VA loan program can save qualified borrowers thousands of dollars, both in terms of upfront costs and over the life of their loans.

Take a look at these four key ways VA loans can save you money.

No Down Payment

Of all the benefits of VA home loans, this remains the most noteworthy -- and most powerful. This is the largest $0 down loan program on the market, and it's helped millions of service members and veterans achieve the dream of homeownership since 1944.

Not having to make a down payment is an incredible benefit for homebuyers, especially first-timers. About 8 in 10 VA borrowers purchase a home without making a down payment.

In comparison, conventional loans typically require at least 5% down, and FHA loans require 3.5%.

On a typical $300,000 home purchase, VA borrowers would need a down payment of nearly $15,000 for a conventional loan and $10,500 for FHA financing.

That's a massive chunk of change that can take veterans years to save. But with the $0 down benefits, there is no need to worry about dipping into your cash reserves.

No Mortgage Insurance

Even if you can handle a 5% or 3.5% down payment, both conventional and FHA borrowers would face the prospect of paying for mortgage insurance.

Conventional loans often require private mortgage insurance for buyers who can't put down 20% of the purchase price. FHA loans come with both upfront and annual mortgage insurance premiums.

Those types of expenses could add anywhere from $50 to $200 or more to your mortgage payment each month. Conventional borrowers usually can stop paying mortgage insurance once they establish about 20% equity in the home. But FHA buyers now pay this extra cost for their entire mortgage term.

There's no mortgage insurance on a VA loan.

Lower Interest Rates

It's a common misnomer that VA mortgage rates are always higher than conventional rates. Interest rates on government-backed mortgages generally tend to be lower on average than conventional loans, with average VA rates leading the way.

Getting a lower interest rate can save a lot of money when you're talking about a 30-year loan. On a 30-year, fixed-rate $250,000 mortgage, a note rate of 5% means a principal and interest payment of $1,342 each month.

Drop the rate to 4.25%, and the monthly principal and interest payment falls more than $110.

Interest rates can vary depending on the lender, the borrower's financial and credit profile, and other factors.

But this general trend is just one more way VA loans make a tremendous difference for those who serve our country.

Lower Closing Costs

There’s no escaping closing cost, no matter the loan product. The good news for veterans is that the VA actually limits what lenders can charge. There are even some closing costs that VA buyers aren’t allowed to pay.

The total amount of your closing costs will be dependent on a host of unique factors, so be sure to speak with your lender to get an accurate estimate. Generally speaking, closing costs are around 3% to 5% of the loan amount.

VA buyers can ask a seller to pay all of their loan-related closing costs and up to 4% in concessions, which can cover a host of other expenses. But who pays for what is always a product of negotiation. Home sellers aren’t required to pay any costs for a VA buyer, either.

Take the Next Step

Veterans United helps veterans become homeowners with VA loans. See what your military service has earned you.

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