Everyone knows that traditional home mortgages need at least a 20% down payment on the entire loan amount. Going by the statistics, average American citizens pay approximately $48,179 for the down payment. However, there is a VA loan that does not require down payment fees. Only if you are a qualified veteran or surviving spouse, the loan does not require a down payment. Such benefit is definitely a boon for the ex-military service members who do not have solid savings. However, the no-down payment scenario does not mean that the borrowers cannot put money down. There are many things you need to know about whether zero down payment is necessary or not.
Of course, there is a catch! As you are going to avail VA loan with no down payment, you cannot borrow more than the loan limit. Now, going over the real-life example, there is a house sold on November 27th, 2019 at 19407 Canter Field Court, Tomball, TX 77377 for $336,097. The house has 3 bedrooms and 2 bathrooms. The borrower was approved of a VA loan with zero-down payment. Therefore, the closing cost was $8,588 for a loan of $336,097. So, you can guess how the VA Loan – 0% down payment – 100% financing actually works. However, down payment is actually required in certain situations. Let us go take a look at whether you need the zero-down payment benefit or not.
Understand why 0% Down Payment is a Great Benefit
Mulling over the flexibility of VA loan, the conventional loan market is left behind. The mortgage does not have high mortgage insurance like conventional and FHA loans. If a borrower puts down less than 20%, the additional mortgage insurance would be added to the monthly payments. In this case, the VA loan ensures 100% financing along with a 0% down payment. Hence, the buyers do not need to pay mortgage insurance either. In this way, a homebuyer can save a great amount of money.
Understand why Down Payment is often Required
The VA Home Loan Guaranty Program emerged in the market to offer veterans a solution to purchase a home with no or little cash. However, the down payment is needed to reduce the funding fee. The funding fee takes care of the loan guaranty to help the lenders to provide with low rates. It is important to know that veterans with service-related disabilities are free from paying funding fees. Also, the down payment lowers the monthly mortgage payment and basic loan amount. The closing cost is even low when the down payment is paid. Gradually, it becomes easier for the customers to sell a home before building equity via the monthly payments.
So, it naturally becomes difficult to decide whether paying down payment is a wise idea or not. VA loan can definitely unlock many advantages for the ex-military buyers or their surviving spouses, the program can get complex to navigate. If you are perplexed with the down payment issue, it is better to seek help from a professional lender now.
Author Bio: Joan Gallardo, a Senior Loan Officer, with 20+ years of experience, here writes on 2 questions to ask the best mortgage lender in Houston when you are about to choose one of the first time home buyer programs in Houston.