5 Benefits of Using a VA Loan to Buy a Home in Aspen

If you’re an honorably discharged veteran of the U.S. Armed Forces – any branch – you could qualify to use a VA loan to buy your next home in Aspen. You may already know about some of the benefits associated with using a VA loan, but here’s a quick rundown of the five that make these loans incredibly popular among veterans.

Your VA loan benefit is guaranteed by the U.S. government provided you meet the right criteria (such as having been discharged under honorable conditions and serving a specific period of time). Some of the most popular aspects of VA loans include:

More lenient loan requirements
The zero-down-payment option
Limited closing costs
No private mortgage insurance requirement
No early payoff penalty

Here’s a closer look at each.

VA Loan Benefit #1: More Lenient Loan Requirements

When you apply for a regular mortgage, a lender looks at your credit score to determine whether you’re a good candidate to borrow money. With a VA loan, lenders still look at your credit score – but they’re not allowed to use it as the sole determining factor in whether you qualify for a loan. The law requires lenders to look at your whole financial picture before making a lending decision.

The debt-to-income ratio for VA loans is often more flexible than it is for conventional mortgages, too. These two leniencies make it easier for someone with less-than-perfect credit to qualify for a home loan.

VA Loan Benefit #2: Zero Down Payment

When you buy a home with a VA loan, you don’t have to make a down payment at all. You can finance the entire price of the home. However, that doesn’t mean you shouldn’t try to come up with a down payment. The more you can come up with now, the lower your monthly mortgage payments will be.

Remember, too, that although you don’t have to come up with a down payment, you’ll still be responsible for paying for things like:

A home appraisal
Credit report fees
Loan origination fees
Recording fees
Surveys
Title insurance

VA Loan Benefit #3: Limited Closing Costs

The VA limits how much lenders can charge you for closing costs. Additionally, the VA won’t let a lender charge you more than 1 percent of the home’s purchase price to cover the costs of originating and underwriting the loan.

VA Loan Benefit #4: No Private Mortgage Insurance Requirement

With a conventional loan, lenders can require you to come up with a 20 percent down payment or pay for private mortgage insurance, or PMI. You’ll have to continue paying PMI until you’ve built at least 20 percent equity in your home.

So why do lenders do this?

Private mortgage insurance protects the lender if you fail to meet your obligations. If you walk away from the house while you still owe money on it, the insurance kicks in and helps minimize the lender’s losses.

Not so with a VA loan, though. The VA forbids lenders from making you pay for private mortgage insurance, so even if you don’t have a down payment at all, you won’t be forking over your hard-earned cash to a private mortgage insurer.

VA Loan Benefit #5: No Early Payoff Penalty

There’s no penalty for paying off a VA loan early – unlike the one you’re likely to have to pay if you don’t use a VA loan. Lenders would rather that you paid your mortgage off over 30 years; that translates into a longer period during which they can collect interest. However, on a VA loan, you could pay it off the day after you get it without paying a “prepayment penalty.” It’s up to you to make extra payments – and lenders can’t charge you a premium for doing so.

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