The Advantages and Disadvantages of VA Home Loans, By Keith W. Springer

So, you've served our country and want to buy a home. Department of Veterans Affairs home loans, known as VA loans (VAHL) for short, were created to help veterans and their families achieve the dream of homeownership. The program has benefitted more than 18 million veterans and dependents. VAHL, which are available to certain veterans, active duty military personnel, and reservists, offer many advantages, although there are also a few drawbacks.

The Advantages

One of the major benefits of VAHL is that they don't require a down payment. Furthermore, there are limitations on closing costs, origination fees, and appraisal fees. Another big advantage of VAHL is that there is no private mortgage insurance. The VA also prohibits lenders from requiring private mortgage insurance since they put a guarantee on the loan. Not having to pay for private mortgage insurance can save borrowers tens of thousands of dollars. Generally speaking, VAHL are a more affordable alternative to conventional home loans.

Applying for a VAHL is pretty much like applying for any conventional home loan, the only difference being that you also have to obtain a certificate of eligibility from the VA. The VAHL process takes two to six weeks, which is about the same length of time that the conventional loan process takes. Just about any lender that offers conventional loans or FHA loans also handles VA loans, so it's not difficult to find a lender to assist you.

The Disadvantages

Despite the numerous advantages that VAHL offer, there are also some drawbacks. One disadvantage of VA loans is that the maximum guaranteed loan amount is $240,000. While this might buy you a decent home in most parts of the country, in high-priced markets in California, it may not be sufficient. What's more, not all vets are entitled to a $240,000 loan. The actual loan amount varies depending on the borrower's income, assets, credit history, and debt.

In some regards, VA loans aren't all that different from conventional mortgages. For example, VAHL aren't any easier to qualify for than conventional home loans. If you have a low income or bad credit, don't count on getting approved for a VAHL. Additionally, it's a common misconception that VAHL's have better interest rates than conventional home loans. The reality is that interest rates of VAHL's are in line with those of conventional home loans. The primary advantage of VAHL's is the fact that you don't have to make a down payment.

There's also a one-time funding fee charged for VAHL's. Congress has levied this fee on VA loans since 1982. The fee ranges from 1 1/4 percent to 3 percent, depending on various factors, such as the veteran's service and whether it's a first or subsequent loan. However, this fee can be lowered if you make a down payment of at least 5 percent. For VA refinance loans, the fee can be anywhere between from a 1/2 percent to 3 percent. Many buyers finance the fee along with their home, but doing so can be quite expensive in the long run, amounting to tens of thousands of dollars over the entire term of the loan.

Ultimately, the choice between a VAHL and a conventional loan will depend on your individual circumstances. For most veterans and service members, VAHL's are a great deal, but in some cases, going with a conventional home loan or an FHA loan may be a better choice.
 

The VA prohibits lenders from requiring private mortgage insurance since they put a guarantee on the loan. Not having to pay for private mortgage insurance can save borrowers tens of thousands of dollars. Generally speaking, VA home loans are a more affordable alternative to conventional home loans. In some regards, VA home loans aren't all that different from conventional mortgages. For example, VA home loans aren't any easier to qualify for than conventional home loans. If you have a low income or bad credit, don't count on getting approved for a VA home loan.
 

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Be Prepared for a Home Loan, By Arundhati M Kher

Everyone wants to buy a house these days, if not as a home for them to stay in, then at least as an investment for the future. But let face the facts - very few people can afford to buy a house outright. More often than not, people end up paying for the house through a loan. And this is what you need to prepare for. And this also depends to some extent on the house you intend to buy for yourself - things like the size of the house, the locality of the house and facilities available near and in the house all factor into the price of the house. More than likely you'll have to pay around 20% to 25% of the total transaction value when you're booking the flat. The rest of the amount can be taken out as a loan and you need to decide whether or not you can afford it. For this, you need to take a careful look at your finances and decide how much of your income and savings you can shell out for this house.

One thing you can do while you're checking on the financial aspect of the loan is using a home loan calculator. Generally, there are online calculators that can help you to sort out how much loan you're likely to get based on both your income and your liabilities. There are also calculators that help you to identify how much you'll have to pay as EMIs once you've got the loan approved and the time has come for repayments on the home loan. You can even calculate all of these matters if you've got a co-applicant for the loan. And frankly, the chances of you getting a loan are higher when you've got good credentials and a higher income and lower liability. Once you've decided how much you can shell out in terms of money, you need to zero in on a house within that price range. You might think that house hunting takes a while, but processing the paperwork for a home loan takes longer. So you want to do all that you can to get yourself ready for it, even as you're hunting for a home.

Look into what the application process is for a home loan. You should know that after getting a loan approved, the loan disbursement can take anywhere from a week to 10 days. But it can either increase or decrease depending on how many applications the bank will have to process at the same time.
 

Arundhati is a veteran author in banking and finance. In her posts she helps her readers find all the latest trends in finance market and also help them analyze loans for your needs, budget planning, etc.
 

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