The Popular VA Loan in Washington DC
What is a VA Loan? A VA Loan is a flexible, government-backed mortgage loan supplied by approved lenders such as Veterans United Home Loans. The military loan guaranty program was created by the U.S. government in 1944 to help service members purchase homes after returning from the field. Since then the VA Loan program has helped more than 20 million veterans and their families purchase homes by providing home financing situations that are within their means.
The VA Loan program is the most powerful home loan program on the market for veterans and their families. Because of the significant benefits a VA Loan offers to veterans who might otherwise struggle to obtain financing, home ownership is a reality.
Because of the loan program’s definite advantages over traditional mortgage, the VA Loan is increasing in popularity. Those advantages are:
No Down Payment– Service members who are constantly on the move may have difficulty saving money and building credit. But with VA-guaranteed financing, borrowers don’t have to put any money down.
The limit is sometimes much higher in some places, but in most places, veterans can borrow up to $144,000 without putting up any cash of their own. Buyers can go above the limit, of course, but for every $4 borrowed after that limit, lenders typically require a down payment of $1.00. For example, if a veteran is trying to borrow $200,000, they would need $14,000 as a down payment. ($200,000 less $144,000 equals $56,000. $56,000 divided by 4 is $14,000).
No Private Mortgage Insurance– Private mortgage insurance (PMI) is insurance that protects lenders in case of a borrower default. If a borrower is not able to put down at least 20%, many conventional lenders will require them to pay private monthly mortgage insurance. This is difficult for many veterans. With a VA Loan, however, there is no PMI. The federal government backs all VA Loans and shoulders the risk on behalf of the borrower typically covered by PMI. This VA Loan advantage allows a veteran to build more and more equity in their home, actually saving them thousands of dollars over the life of their mortgage.
Competitive Interest Rates– Home loan interest rates are based on risk assumed by a financial institution to finance a loan. Because the VA backs each VA Loan with a guaranty, financial institutions carry less risk and can, therefore, offer interest rates of 0.5 to 1 percent lower than conventional interest rates. The savings add up significantly when a veteran is able to combine the advantages of no money down, a very low interest rate when purchasing a home, and no PMI.
Two additional benefits which add to the popularity of a VA Loan are:
Basic Allowance for Housing (BAH)– Lenders can count BAH as effective income, which means a veteran can use BAH to pay some or all of their monthly mortgage costs. Pay grade, geographic location and number of dependents determines BAH. Learn more about Basic Allowance for Housing: http://www.veteransunited.com/va-loans/basic-housing-allowance-bah/.
No Pre-Payment Penalty– Paying off a home loan before it matures results in a pre-payment penalty with many different types of loans. When a homeowner pays off a home loan early, lenders miss out significant amounts of interest. Pre-payment penalties are a financial institution’s way of recouping some of that interest money. An added benefit of a VA Loan allows for a home loan to be paid off at any time without a pre-payment penalty. Without pre-payment penalties, borrowers have the freedom to consider future home purchases and refinancing options.
Many states and many localities offer additional benefits over and above what the government provides. The types of programs vary from place to place, too. For example, Maryland, the Old Line State, exempts disabled vets from paying property taxes. Retired service people are exempt from paying state income taxes on the first $5,000 of their retirement income.
To find out what the state of Maryland or Virginia offers for veterans, visit http://www.military.com/benefits.
Look into government programs and the benefits Maryland or Virginia or the county you live in offers. It’s to your advantage. Failing to do so could mean leaving money on the table when you purchase a home.
Since there is no central repository for local information, you’ll have to do some digging. I suggest you start with Maryland's or Virginia's VA department.
As your real estate agent, we take my responsibility of service to you as a veteran very seriously. If you are looking to purchase a home with a VA Loan in Virginia, Maryland or the DC Area, please call us at 202-243-7700 or contact us at Sheena@SaydamProperties.com today.