Pros and Cons of a VA Loans

2014/09/VA-loan.jpgThe VA or Department of Veterans Affairs loan is a type of loan that is guaranteed by the Department. It is especially designed for those veterans who have served the country in the past. It allows them to mortgage a home at a relatively low mortgage rate because they have been an integral part of the country’s defense.
Eligibility Criteria
There are many borrowers out there who are willing to get VA loans in the Middle TN real estate market. To be eligible for a VA loan, there are three basic eligibility requirements:
• You have served on active duty in the US Armed Forces. It is important that you have served in an honorable way and you have been discharged on a good note. The length of service is dependent upon the time you have served during the time of war or peace.
• You are a reservist i.e. you have served in the military reserve forces.
• You are the surviving spouse of a veteran. If your partner has served in the US Army, you can apply for VA loan. Whether your spouse died on warfront or naturally, you are eligible.
If you belong to any of these categories, you need to request a certificate of eligibility from the Department of Veterans Affairs.
VA loans’ upper limit is usually $417,000. You have to keep that in mind while applying for the loan. If you are planning to buy a multi-million dollar property, VA loan might not be the right choice for you. Apart from that, debt to income ratio of the borrowers needs to be 41% or lower than that.
Pros of VA Loans
• The best part about a VA loan is that you don’t need to make any down payment. In the current Middle TN real estate market, this is not very common.
• Apart from that, there is no need of paying Private Mortgage Insurance (PMI) premiums. If you are applying for some other mortgage loans, PMI is necessary but not with VA loans.
• Interest rates are flexible. You can get the best interest rates on your mortgage.
• There is no penalty for prepayment. Assistance is offered to those who are unable to make payments due to financial constraints.
Cons of VA Loans
• There are few drawbacks of VA Loans as well. They are not ideal for everyone. If you have cash in hand and you can make down payment easily, you can get non-VA loans too at a much lower interest rate.
• VA loans can’t be used for buying investment properties. You can only buy your own home. There is no guarantee that the home you are planning to buy has no defects.
• VA loans are tend to be slow and take a much longer time as compared to other types of mortgage loans.
Considering all the pros and cons, you can figure out whether VA loans are suitable for your particular situation or not. It is better to take advice from a loan officer who could guide you about the entire process.