VA
The Different Types of Mortgages
Mortgage

A VA mortgage is a mortgage loan from the United States Department of Veterans Affairs secured by a mortgage on a home owned by the borrower. It is one of the few government backed programs that does not require a loan officer to be a veteran. The VA pays the interest on behalf of the veteran for the first five years and then assumes responsibility for the remaining balance. There are certain eligibility requirements, pre-qualification and credit criteria to be met, and the VA assures that it does its best to make sure loans are provided to veterans. One of the most popular mortgage options is the VA mortgage.The United States government has an estimated nine hundred and sixty-two Veterans that are currently homeless. These individuals would not have qualified for any VA loans under the veteran's preference option. As a result of their membership in the Veterans Association, veterans may apply for a VA mortgage and secure financing at reasonable interest rates.Veterans have special needs when it comes to mortgage loans. They are often better employed than homeowners or have other assets that make them better able to afford the monthly payment on a VA mortgage. In addition, many of the original loan applicants for VA loans are self-employed, retired military personnel, or disabled. Because of these factors, many private lenders and veteran borrowers are turning to the Veterans Administration for mortgage assistance. The VA is more concerned with ensuring the stability of the financial market, so there are fewer problems with underwriting VA mortgage loans.A VA mortgage is not a conventional loan. Many traditional banks and lending institutions do not offer VA loans. Some of the advantages associated with a VA loan are as follows:No down payment required - One of the most attractive features of a VA mortgage is the absence of a traditional loan requirement. A VA loan can be considered on a case-to-case basis. In the event that the applicant is unable to repay the loan, the property will be sold to pay off the mortgage. This is different from a conventional loan where a borrower must make the regular monthly payments required.No Income Verification - Unlike conventional loans, a veteran may not need to verify his or her income or employment status when applying for a VA mortgage. A veteran can apply for a VA mortgage without providing any type of income or employment verification. This is in stark contrast to a conventional mortgage which requires the veteran to provide income verification or a bank representative.No prepayment penalties - Another benefit of a VA mortgage loan is the absence of prepayment penalties. Some conventional lenders have implemented prepayment penalties in an attempt to force homeowners to remain within their affordable homes. However, a veteran does not need to worry about this penalty. VA home loans do not have prepayment penalties.This offers many benefits to veterans and a major reason why it's now one of the best options for first time home buyers. Veterans have the opportunity to purchase a home at a lower cost. Also, a veteran never has to worry about a prepayment penalty or foreclosure. The process is very simple and hassle-free. There is no reason why any veteran shouldn't take advantage of this opportunity.There is one major drawback to going with a VA loan. If you're a veteran and you decide to refinance to a conventional lender and get a much better interest rate than your VA mortgage, you will forfeit any VA interest paid on your new mortgage. This means that you would have paid back all of your VA mortgage interest plus any interest paid on your new loan. Although you may be eligible to get a better interest rate, this is the only disadvantage to going with VA financing.Conventional lenders do have some advantages over VA loans. Most VA loans are backed by the government, which offers a degree of governmental backing that a conventional lender does not have. In addition, most VA loans require no appraisal; they simply require that the home is at least livable. If the home is a total loss, the lender will often make a fair offer that is far below the fair market value.Another advantage that many people enjoy as an alternative to a VA loan is that it typically allows for quicker approval. If you apply for a VA mortgage and your credit is poor or if your income is low, your VA lender may be able to expedite your approval. If you go with a conventional mortgage lender and you have great credit, you can expect to wait four to five months before you receive a decision about whether or not you will be approved. By then it may be too late to change your mortgage.

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