If you're a veteran, a VA loan might seem like the perfect option for financing a home. However, there are some important differences between VA and conventional loans which could affect your decision. Here are some of the major pros and cons of VA loans to help you make the best financial choice:
No Down Payment
VA loans do not require a down payment, which could potentially save you thousands of dollars on your home purchase. Conventional loans require down payments of a minimum of 3% of the home's purchase price, and higher down payments are often encouraged in tough markets. However, with a VA loan you can skip the down payment step.
No PMI
Private Mortgage Insurance is required by lenders if you fail to meet a specific financial criteria. Examples could be a lower than normal down payment, low credit score or a high debt-to-income ratio. The policy protects the lender in case you default on the loan. VA loans don't require you to buy a PMI policy, saving you time and money.
No Prepayment Penalty
Some loan options on the market charge a penalty for paying off your mortgage before the end of its established term. VA loans don't have any penalties for prepayment, so you're free to spend your money however you choose.
VA Funding Fee
VA loans do come with a specific upfront cost called a funding fee. Funding fees go toward keeping VA loans available to future veterans. There are some ways to be exempt from paying the fee, but it's a mandatory expense in most cases.
Primary Residences Only
Another major drawback to VA loans is that they are restricted based on property use. You can only use a VA loan to finance a primary residence. Therefore, you couldn't use it to buy a vacation home, rental property or other type of investment.
Is a VA loan the right choice for you? Consider these pros and cons when making your decision to determine whether it's the best solution for your homebuying needs.
Shana Lundell has been a real estate professional since 2003 in Bourne, Cape Cod, Plymouth and the surrounding areas, where she’s lived since 2000. Shana is a luxury and waterfront specialist who has represented hundreds of buyers and sellers, including representing builders in over 100 new construction transactions in her career. She consistently achieves recognition awards for top production, including membership in the Coldwell Banker® International President’s Elite, an honor reserved for the Top 3% of agents globally. Shana ranks in the Top 100 of 4,000 Coldwell Banker agents in New England.
Shana works with a range of clients, including lifestyle properties, vacation residences, down-sizers, trade-up buyers, land, first-time home buyers, and new construction sales. She understands that moving happens for a myriad of reasons and has had the honor of helping all types of transactions. Many emotions can come into play during this time, but Shana is skilled at keeping calm and carrying on with care, professionalism, open communication, and the ability to keep things on target to achieve results. She guides her clients smoothly through the process, from dynamic marketing measures, negotiation and solution strategies, connecting pivotal professional resources, to coordinating the essential closing details.
Shana is proud to have over 100 five-star client testimonials that rave about her positive, professional, responsive, and authentic approach to real estate service. Love where you live. Live where you love. Looking to buy or sell? Call Shana Lundell!
