The $40K in VA Home Loan Benefits You May Not Be Claiming
The average VA home loan benefit amount is $40K — are you claiming all of your VA mortgage benefits?
Whether you currently own a home or are looking to purchase one, your VA status may entitle you to considerable mortgage savings. In fact, Veterans who partner with the right lender, save an average of $40,0001 over the life of the loan.
In addition to savings over time, VA home loan benefits include no down payment requirements, low interest rates, and lenient credit guidelines when compared to other loan types. It’s no surprise then, that Fannie Mae reported 9% of loans closed in December 2019 were VA loans.
VA Home Loan Benefits Checklist
I am a veteran and want to BUY a home.
The VA helps active-duty servicemembers, Veterans, and eligible surviving spouses with mortgage benefits, including the following:
1. No down payment
It takes an average of 12.5 years to save up the 20% down payment required for a conventional home loan2. Eligible Veterans and active-duty servicemembers can skip that step and become homeowners without waiting to save up thousands of dollars. In fact, the VA home loan program allows Veterans to purchase a home with as little as 0% down. With interest rates remaining at the lowest levels in two years, it just makes good financial sense to purchase a home.
2. Lower monthly payments
Because the federal government backs all VA mortgages, there is no need for private mortgage insurance (PMI) on VA home loans with low or no down payment like other loan types. The average time it takes to eliminate PMI on a conventional mortgage is 10 years — eliminating this requirement means a savings of almost $200 per month and $24,000 savings over the life of the loan.
3. Easy pre-qualification
In many real estate markets across the country, there is stiff competition between home buyers. One of the best ways to set yourself apart from other buyers is to get a VA pre-qualification letter. Not only will you know exactly how much you can afford and which VA home loan benefits you actually qualify for, but home sellers and real estate agents consider you a more serious home buyer than those without.
I am a veteran and currently OWN a home.
Even if you already own a home, there are substantial savings that Veterans and active-duty servicemembers shouldn’t pass up. VA home loan benefits vary depending on your home purchase history, check the benefits below based on your mortgage history:
1. I already have a VA mortgage.
With a current VA mortgage, you have access to one of the greatest benefits of a VA home loan — the ability to reduce your existing rate by refinancing easily and with little or no out-of-pocket expenses. A VA streamline refinance (also known as an Interest Reduction Refinance Loan or IRRRL) can be completed with minimal documentation requirements and often within 30 days. This can be especially helpful for Veterans who may have experienced a significant change in circumstances such as the loss of a job, bankruptcy, or a significant decrease in home value.
2. I own a home but did NOT use my VA benefits.
If you don’t currently have a VA-backed mortgage, you’re in a position to refinance with a VA cash-out refinance which gives you all the benefits of a standard VA home loan, plus some added advantages. Depending on the lender, Veterans and active-duty servicemembers can tap into their home equity for up to 100% of their home’s value. This means any amount above the current mortgage balance and below the current home’s value can be withdrawn as cash. There are also no restrictions on what the cash can be used for. One common use is paying off high-interest credit cards because the interest you pay on your VA mortgage is tax-deductible — with credit cards, it’s not.
1 MGIC Rate Finder | Average savings calculated on a $250,000 mortgage and is based on elimination of a $198/month PMI premium for 12 years ($2,376 per year) and an interest rate reduction of 0.25% (worth $420/year for 30 years with current available VA interest rates as of 6/21/2019). This equals a total savings of $41,112 compared to conventional loans.
2 MarketWatch, “Saving for a down payment? It could take you until 2027,” November 5, 2014. | It takes an average of 12.5 years to save up a 20% down payment on a median $259,000 home ($51,800 total) with a current personal savings rate of 5.6%.