If you’re like many honorably discharged veterans of the U.S. Armed Forces, you’re eligible for a VA loan – but should you use this free (and well-deserved) benefit? Here’s what you need to know.
3 Big Benefits of Using a VA Loan to Buy Your Next Home in Baltimore County
- No down payment
- No prepayment penalty
- No private mortgage insurance requirement
Here’s a closer look at each.
No-Down Payment VA Loans
You can buy a home with nothing down if you’re using your VA loan benefit. The no-down-payment makes these types of loans far more attractive than conventional loans are – but remember, the more you borrow, the higher your monthly payments will be. If you can even come up with a few thousand dollars to put down, you could lower your payments significantly.
Pro Tip: Nothing down doesn’t necessarily mean you don’t have to pay some out-of-pocket costs. You’ll still be required to pay the closing costs you’re responsible for, and you’ll still have to come up with an earnest money deposit when you find a home you’re interested in.
No Prepayment Penalty on VA Loans
Here’s the deal: Many lenders don’t want you to pay off your loans pay off your loans early because it means they’ll miss out on interest payments; for that reason, they charge you a prepayment penalty. However, they can’t do that if you have a VA loan – the law doesn’t allow it. That means you can make extra payments toward the principal on your loan and shave time off the back end, or you can make a balloon payment and pay off your loan all at once without having to pay costly fees.
No Private Mortgage Insurance Requirement
When you borrow using a conventional loan, you usually need to put down at least 20 percent of the home’s purchase price – and if you don’t, you have to buy private mortgage insurance. Private mortgage insurance protects the lender in case you walk away from the deal without paying off your obligation. It can be pretty expensive, too, and you have to keep paying it until you’ve built 20 percent equity in your home. However, lenders aren’t allowed to make you buy private mortgage insurance, or PMI, if you’re using a VA loan.
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