Home loan interest rates now average around 6.25 percent — making home financing prohibitively expensive for many aspiring homeowners. If you’re a veteran or current service member, or eligible surviving spouse, it’s a good time to see if you qualify to take advantage of the VA home loan.
A VA home loan, or veterans loan, is a type of mortgage backed by the U.S. Department of Veterans Affairs designed to make home ownership achievable for those who have honorably served their country. VA home loans are provided by private lenders, such as banks and mortgage companies. VA guarantees a portion of the loan, enabling the lender to offer the prospective homebuyer more amenable terms.
A VA loan offers several advantages:
- Typically, no downpayment required;
- Competitively low interest rates (veterans qualify for special discounted rates);
- Limited closing costs;
- No Private Mortgage Insurance required;
- Lifetime benefit (recipients can use the guaranty multiple times);
- Option to refinance mortgage loan;
- Ease of purchase.
Are you a veteran or service member interested in selling your home? Another important benefit is that veteran loans are the only loan programs that are “assumable” — in other words, they can be transferred to the home’s next owner. So, veteran loans make home buying more attractive for both the seller and the buyer.
For example, let’s say seven years ago, a veteran purchased a $1 million home at a 3 percent interest rate with zero down payment; today, they would still owe $850,000. If they sold the home, they would be able to transfer that loan at $850,000 with a 3 percent interest rate to the next homeowner (who does not need to be veteran) — which will be much more advantageous to them and would potentially yield multiple offers for their home — versus the new buyers getting a 6.25 percent loan.
There are several organizations that specialize in finding homes or providing home loans to veterans, such as USAA, Veterans United and Veterans First Mortgage. Helpful information can be found on the Veterans Affairs website at benefits.va.gov/homeloans. Be sure to read the VA Home Loan Buyer’s Guide to understand the home buying process and learn how to make the most of your VA loan benefit.