Pros and Cons of a VA Loan

     Are you a Veteran interested in buying your own dream home? If you were honorably discharged, then you can easily opt for a VA mortgage loan.  Confused or having doubts about what a VA mortgage is?  Then let us help you and provide the necessary details.

What is a VA Loan?
     Basically, a VA mortgage is a loan to buy a home, available only to the veterans, active duty, or reservists of the United States Armed Forces, and which is guaranteed by the Veterans administration. This type of loan offers lower down payment requirement than most standard mortgages and lower comparable interest rates. This is possible because the banks know that the loans are backed by a federal agency and the bank will be paid back losses on the loan if it ever defaults. Spouses of veterans are also eligible to get a VA mortgage even if the veteran is deceased.

History of VA Loans

     In 1944 after the World War II the VA mortgage guarantee program was invented so that it could limit the effects of economic and social hardship that the millions of veterans faced in the war. The basic function of the VA mortgage program is to finance or guarantee the conventional mortgages for the eligible U.S. veterans. This program does not lend money directly to borrowers but it only guarantees to lenders that they will recoup 25 percent of a loan if the borrower defaults on it. It therefore gives lenders the incentive to lend to veterans. Only an eligible VA veteran or his family is eligible for a VA Loan. 

Pros and Cons of a VA Mortgage 

     There are three major benefits in having a VA home loan. 

First,  The VA mortgage eliminates the need for private mortgage insurance, an insurance premium the borrower pays in order to protect the lender against borrower defaults. Even the FHA has a very high monthly premium that Veteran loans do not have. 

  

      Second,  A veteran can purchase a home using the VA mortgage program without putting any money down. This is ultimately up to the borrower. If the borrower wants to put money down, he still can do so.

      

     Third, VA mortgage programs provide low, competitive and fixed interest rates often .25%-.5% less than regular conforming loans. 

      Misconceptions about VA Loans

People are of the misconception that the VA mortgage program can be used only once by a qualified veteran, however, this isn't true. This program can be used as many times as needed if all the guidelines are followed perfectly.

People are also under the misconception that the VA makes loans. The VA does not make loans, however they will insure the lender against losses so banks really like this and it gives them an incentive to make loans. So you have to find a bank that makes VA loans and apply with the bank or lender of your choice. 

Colorado VA loan participating lenders