THREE GREAT BENEFITS OF A VA LOAN : Similar to conventional home loans via Fannie Mae and Freddie Mac, VA loans are “made” by private mortgage lenders like our branch of Megastar here in Redding, CA. However, what makes VA loans different is that their performance is guaranteed by the federal government. More specifically, VA loans are guaranteed by the U.S. Department of Veterans Affairs, protecting lenders against losses due to default.
The VA Loan Guaranty Program was established in 1944 as part of the G.I. Bill of Rights program. VA mortgages are underwritten to a different set of guidelines as compared to conventional and FHA home loans, and other loan types.
One notable variation is that loans via the VA Loan Guaranty program (1) “Requires No Downpayment.” So long as a subject property appraises for its purchase price, a buyer can finance the home’s full amount, up to the local VA loan limits for the area. Another variation is that VA home loans have no (2) “Mortgage Insurance Requirement.”
Whether you make a 20% downpayment or no downpayment at all, your annual mortgage insurance payment is zero. This can render VA loans much less costly on a monthly basis as compared to conventional or FHA financing, where mortgage insurance rates can top 1.5 percent annually.
A third benefit a VA loan allows for is a (3) “Higher Debt-To-Income Ratio”, which can make qualifying for a home loan easier.