When shopping for a home loan, consider this – VA loans have an interest-rate advantage over most other types of loans. VA borrowers with lower credit scores tend not to be penalized with higher interest rates like conventional borrowers do. Typically when a conventional borrower has a credit score below 720, a higher interest rate will be applied to that home loan comprar casa espana. And, regardless of credit score, a conventional borrower will most likely have to put twenty percent down in today’s loan market. Larger down payments and higher interest rates are a common way for conventional lenders to offset risk.
VA loans work differently. The U.S. Department of Veterans Affairs guarantees a portion of every VA loan made by VA-approved lenders. This guaranty, takes the place of higher interest rates and large down payments for offsetting risk. Therefore, VA-approved lenders can offer more attractive terms like zero down and lower interest rates.
Lower interest mortgages have their advantages for VA borrowers. Since credit scores don’t dictate interest rates for VA loans, VA borrowers can save money in monthly payments with lower interest rates. Take a $250,000 loan, for example. A VA borrower will save $77 per month with a.5% interest rate reduction – that adds up to $924 per year or $27,000 for the life of the loan.
Additionally, a lower interest rate enables a VA borrower to pay less monthly for a more expensive home while a conventional borrower makes higher monthly payments on a home of lesser value.
The interest advantage is only the beginning to the benefits VA borrowers can receive — even with less-than-perfect credit. Remember, in today’s loan market, 20% down is expected for most $250,000 conventional loans. So, a conventional borrower would have to gather $50,000 cash just to qualify. The story is quite different for the VA borrower who would need to pay nothing down for the same size VA home loan. This zero-down feature associated with VA loans is why the VA home loan program is so attractive to so many people.
Benefits associated with VA loans don’t stop at lower rates and zero down payments. Additionally, no private mortgage insurance (PMI) is necessary for VA borrowers. PMI is a monthly premium charged on conventional and other type mortgages there is less than 20% equity in the home being financed.
For VA loans, there are never any PMI premiums due, so the VA borrower saves money thousands over time in monthly payments. So, on a $250,000 conventional mortgage, an average monthly PMI premium would be $191 or $2,292 per year.
Saving money each month on a mortgage is great, but just qualifying for a loan is the first hurdle borrowers have to get over. In fact, VA casas en venta loans have easier qualifying guidelines than with most other mortgage programs. VA-approved lenders follow straight-forward loan qualifying guidelines set by the U.S. Department of Veterans Affairs. Things like debt-to-income ratios and residual income standards set by the VA are more generous than those of conventional loans. Each geographic region has specific residual income requirements, so VA-approved lenders simply consult the VA table to determine what’s required for a certain area.
For more information about VA loans and the interest rate advantage associated with them contact a VA home loan professional.