You Earned It: VA Benefits for Your Home Purchase
The VA offers a special home loan program for Veterans, active Servicemembers, and surviving spouses. VA Home Loans help the dream of becoming a homeowner a reality for many that have or are currently serving.
Getting started with buying a home can be a daunting task for anyone. The VA Home Loan process is a little different from a conventional mortgage, FHA loan, or other specialized home loans. Don’t worry, we’re going to walk through the process so that you feel confident moving forward in your home purchase process.
What makes the VA Home Loan program so special?
There are many ways that the VA Home Loan program is special, and worth investigating over a conventional mortgage if you’re searching.
VA Loans are not loans made by U.S. Department of Veteran Affairs. They are simply backed by the VA. This means that you can shop around for mortgage rates from VA approved lenders, allowing you more options to save on your home purchase.
Interest Rates for VA Loans vs. Other Home Loan Options
What’s one of the biggest perks to the VA Home Loan? Interest rates are lower for VA Loans!
No matter how you cut it, a VA Loan offers better interest rates than other loan programs. The extra savings equal opportunities to save for a renovation, retirement, investments, engagement rings, and more. Here’s how that looks using interest rates for VA Loans today (12/29/17) versus conventional mortgage rates:
Example Interest Rate Savings Using a VA Home Loan vs. Conventional Loan
For the sake of this example, let’s start with some basic numbers.
- VA Loan: 3.75% (30 yr fixed, USAA)
- Conventional: 3.875% (30 yr fixed, USAA)
- Home purchase price: $250,000
Keep in mind, this example will just include the difference that the interest rates can make. If you would like to see the massive amount of savings that a VA Loan creates in total, keep reading or skip to the bottom.
VA Loan Expenses: If you chose a VA Loan (based on a 3.75% fixed interest rate for 30 years), your monthly payment would be $1,157.79. That monthly payment covers your principal ($250,000) and the interest paid towards the home purchase. The interest paid over 30 years would be $166,804.03, which would put the total cost after 30 years at $416,804.03.
Yes, that sounds expensive, but consider the alternative.
Conventional Loan Expenses: Homebuyers that choose a conventional loan would end up payment $1,175.59 each month. Again, this monthly payment goes towards the principal ($250,000) and the interest of the mortgage. The total interest paid over 30 years for the conventional mortgage loan would be $173,213.38, for a total cost after 30 years equalling $423,213.38.
The total savings, just based on interest rate differences, would be $6,409.35 over 30 years.
If this is your first home, you could also be looking at a first time homebuyer loan (Conventional 97). The interest rates for these can be significantly higher than a VA Loan. Using the same example above and a 4.5% interest rate for a Conventional 97, a VA Loan would save you $39,212.75.
Additional Big Benefits of a VA Home Loan
- No downpayment required
- No private mortgage insurance (aka PMI)
- VA Loans can be refinanced (special refinancing programs like Streamline Refinance / IRRRL)
- VA Home Loan benefits can be reused
These additional benefits and features of VA Loans make them extremely unique compared to other home mortgages. With no downpayment, the immediate cost of owning a home with a VA Loan comes down to your funding fees and making your first monthly payment. Eliminating PMI is also a major perk of VA Loans that can help you save money each month as well.
How Do You Get Started with a VA Home Loan?
Don’t let the home buying process weigh you down. If purchasing a home is right for you, then this should be an exciting and fun experience. The feeling of finding your home and making your own is part of the American dream.
Getting started with your VA Loan is easy:
- Get your Certificate of Eligibility (COE) from the U.S. Department of Veterans Affairs
- Start shopping for the best rates.
- Get prequalified: This can be a major advantage when it comes to putting in an offer. Lenders have a pre qualification to help you know what you can afford. *Note: You really only need one pre qualification to get started.
- Once you’re prequalified and you have found your ideal VA approved lender, you can start shopping for your home.
Good luck with your next home purchase! Have questions? Contact us!