Many Soldiers do not realize or utilize many of the benefits provided to them when buying a home in San Antonio. The VA Home Loan Program is one of those that I will talk to you about today. This program allows Veterans and Soldiers to purchase homes that they may not have been able to purchase and may help them save thousands of dollars during the life of the loan.
The advantages of a VA loan that can help you purchase your home:
- No Required Down Payment
- Reduced Closing Costs
- No Private Mortgage Insurance
- No Early Prepayment Penalty
No Down Payment
There is no down payment required in most cases. A down payment may be a heavy fiancial burden for some people to overcome. An eligible veteran or Soldier may not have to put any money down on the home of their dreams. The maximum amount that can be finance is 100% of the reasonable value of the property. The VA establishes the maximum guaranteed loan amount, with the current maximum at $417,000.
Reduced Closing Costs
Compared to conventional loans, the closing costs on VA loans is substantially lower. Since the VA Department doesn’t allow the borrower to pay certain fees, the seller and lender must step in and pay for them. In this real estate market, it is common for sellers to offer buyers closing credits to pay for any additional closing costs or to pay points to reduce the interest rate.
NO Private Mortgage Insurance
An additional advantage with VA Loans is that there is no Private Mortgage Insurance (PMI) payment, which is usually about 1 percent annually. This can amount to $100-$200 monthly. PMI is charged to insure lenders against foreclosure loses and you must pay this insurance until you can cancel it once your equity reaches 80 percent of the value of the property.
No Early Prepayment Penalty
You will not be penalized for paying the loan off early, which will lower your closing costs when you sell the home.
When you look at the advantages that the VA Home Loan Program provides compared to doing a conventional mortgage – you truly realize how beneficial it is to be a VA eligible home buyer.
In addition to these advantages, most Soldiers have another great benefit in that they receive a monthly housing allowance to pay or subsidize off-post housing payments. This housing allowance currently ranges from $677 – $1586 per month depending on rank and whether Soldiers have dependents or not.
From my experience as a Soldier, what I’ve noticed is that the general housing plan is to either accept military housing (in which housing allowance is not provided) or use your housing allowance to rent. The following are the two most common reasons as to why fellow Soldiers choose not to buy a home:
1. “Buying a home is complicated”
2. “Can’t afford it” (upfront costs and monthly payment)
Buying a home is not necessarily a complicated process. As a matter of fact, the home-buying process can take as little as 45-60 days to complete as long as you have dedicated professionals to guide you along the way. These professionals are Realtors who are knowledgeable and honest and have experience working with Soldiers and Loan Officers who are familiar with the VA Loan Program and can advise you through the nuances of VA financing.
As for the second reason, “I can’t afford it” – this obviously can be left to interpretation depending on your needs and wants. But let’s examine this a little closer because the cost of homeownership for you may be a lot cheaper than you think.
It is not unusual for a VA buyer to come in with little to no money out-of-pocket at closing. This is due to reduced closing costs and the fact that there is no down payment required for a VA Loan. In most cases it can be less than a typical security deposit for rent.
Well, what about the monthly mortgage payments? This is where the housing allowance comes in. You can ask your lender to calculate what your monthly payment would be for the loan amount with no down payment. You can then compare that mortgage payment with your housing allowance and see what the difference would be. For example, let’s say your monthly payment with no money down is $950 and your housing allowance is $1001. Then your housing allowance would be able to cover your mortgage payments with extra money left over. You also get the benefit of owning your own home.
I hope that this information will help Soldiers to realize one of the benefits of serving our country and to utilize their benefits to invest in their future.