If you’ve received an honorable discharge from any branch of the U.S. Armed Forces, or if you’re currently serving in the military, you’re eligible to use a VA loan. In many cases, a VA loan helps the borrower get more favorable terms than he or she would get with a conventional loan — but what are the benefits, and could it be a good idea for you to use one?
What Is a VA Loan?
A VA loan is a traditional loan backed by the Department of Veterans Affairs.
Because the VA backs these loans, lenders are often more willing to extend credit on favorable terms.
Benefits of VA Loans
Some of the benefits of VA loans include:
- Borrowers don’t need a down payment (as long as the home’s sale price doesn’t exceed its appraised value)
- Borrowers don’t need to purchase private mortgage insurance, or PMI
- In some cases, the seller can pay closing costs
- There is no prepayment penalty if a borrower chooses to pay off the loan early
- Borrowers who have a difficult time making payments may qualify for help from the Veterans Administration
You don’t have to be a first-time homebuyer to use your VA loan, and you can reuse the benefit as many times as you like (the only catch is that you must pay off one VA loan before you open another).
Who’s Eligible for VA Loans?
If you have an honorable discharge from any branch of the military, or if you’re currently serving — even in the reserve components — you could be eligible for a VA loan. Some surviving spouses are also eligible.
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