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VA Loans – What Makes Them Great? | PenFed Credit Union

What you'll learn: Learn the benefits of obtaining a VA home loan and if it’s right for you.

EXPECTED READ TIME: 5 MINUTES

September 30, 2022

VA Loans: What Makes Them Great?

You served. You sacrificed. Now, you deserve a place to plant roots and call home.

You’re in luck: The Department of Veterans Affairs (VA) loan program offers unique benefits that make home ownership possible, and often more affordable, than mortgage options available to civilians. In this article, we’ll count the advantages of a VA home loan and explore some of the numbers behind the millions of military families who’ve already reaped its benefits. Will you be next?

5 benefits of the VA loan

Do VA home loans require a down payment? Who pays closing costs on a VA loan? Do you need good credit for a VA loan?

Questions abound surrounding this topic, and we’re happy to share that the answers usually bring relief and reassurance to aspiring homeowners. Here are some of the most compelling benefits of a VA mortgage loan.

1. No down payment

Saving for a down payment can separate the homebuying dream from reality – or at least push it back a few years. VA loans provide the rare opportunity to purchase a home with as little as no money down. This is a huge advantage over other mortgage types, which typically require at least 3.5 percent down.

2. Better interest rates

A lower interest rate can reduce monthly payments and save you thousands of dollars over the life of your loan. VA home loans generally have lower interest rates than conventional or Federal Housing Administration (FHA) loans.

3. No mortgage insurance

Other home loans may require you to pay mortgage insurance if you have a low down payment, which protects your lender if you stop making payments. Because VA loans are backed by the federal government, no insurance is required – lowering your monthly payment and allowing you to save or put more money toward the principal each month.

4. Fewer closing costs

Closing costs cover the time and expenses from activities like the mortgage underwriting, title and record filings, application and attorney fees, inspections, and more. The VA limits the total amount of VA closing costs or fees you can pay. Instead, the seller pays these fees.

5. Easier loan qualifying

VA loan guidelines can be slightly less restrictive than those for a typical mortgage. You will still need to qualify based on credit, income, and VA eligibility but, overall, the process can be easier than it is for a conventional or FHA loan.

A brief history of the VA loan program

The VA home loan program dates back to World War II as part of the Servicemen’s Readjustment Act of 1944. According to the VA’s legislative history, credit was viewed as a cornerstone to helping veterans readapt to civilian life. Because members of the Armed Forces may have missed the opportunity to establish credit, they could be at a disadvantage for loan approval. The VA’s program leveled the playing field and offered a reward for veterans’ sacrifice.

What it means for VA loans to be “government-backed”

We already mentioned that VA loans are insured by the U.S. government, which provides protection for lenders if borrowers default on their loans. That means, ultimately, U.S. taxpayers fund the VA home loan program. The VA collects a funding fee from most VA borrowers to help reduce costs for taxpayers and make the program possible.

Who gets VA loans? Here’s the breakdown

Think VA loans are only for a select few? Think again: VA-backed loans hit a record in 2021, with over a million loans processed in a single year! Let’s take a closer look at how VA loans were distributed in 2018:

Most VA loan borrowers put no money down

Is the promise of no down payment with a VA loan just marketing hype? The data says otherwise. In fact, nearly 80 percent of all VA purchase loans had no down payment.

Fist time vs. previous homebuyers

It’s a common misconception that VA loans are meant for first-time homebuyers. It’s actually close to an even split, with the majority actually going to previous homeowners.

First-Time Homebuyers	Previous Homebuyers
42%	58%

VA loans span all ages

Worried you missed the boat and should’ve applied years ago? Consider this an invitation to come aboard. Your VA loan benefits don’t expire with age or after a certain number of years after discharge. As you can see, VA loans are obtained by adults in all seasons of life.

Ages 18–25	28%
Ages 36–55	40%
Ages 56 and up	32%

Ready to dig deeper?

Our latest eBook is here! With everything VA loan: How does a VA loan work? What sets them apart from conventional loans? And how do you qualify? From unique benefits to eligibility, loan options, and more, this eBook brings together the most important details so you can get started on your path to home ownership and refinancing through VA programs.

This downloadable eBook is your go-to for everything VA loan, including:

Benefits of the VA loan
VA certificate of eligibility
VA vs. conventional loan
VA funding fees
VA refinance requirements

For more information about PenFed Mortgages:

PenFed Mortgage:

800-970-7766

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Disclosures

¹Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 30_YEAR_FIXED_VA_ADVANTAGE_POINT discount point, which equals percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $450,000; loan-to-value ratio of 95%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.

^*Prime Rate is RV Prime Rate % as of Boat Prime Effective Date . The APR for this Home Equity Line of Credit (HELOC) is based on prime plus a margin and can change monthly. Fixed Rate Advances will be amortized over the Fixed Rate Advance Term, with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin, and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than 1020 ELOC OO CLTV 70 Rate % for primary residences and second homes.

Annual Fee: Notwithstanding the foregoing, an annual fee of $99 will be assessed on each account anniversary.
Home equity lines of credit (HELOC) are variable rate loans and the interest rate is subject to increase after consummation of the loan on monthly basis. Closing costs range between $500 and $8,500 for credit lines of $500,000. Contact a representative for additional details.

Appraisals: PenFed will attempt to establish value via an independent method. If that method is unsuccessful, or the value is not sufficient for the amount requested, an appraisal will be required regardless of CLTV. An appraisal is always required in the following circumstances:

For all loans with a loan amount greater than $400,000.

If an appraisal is required, it must be ordered by PenFed. You will be contacted for authorization and payment prior to ordering. Appraisal fees average $550 to $850 (some run higher).

Closing Cost Credit: PenFed will pay most closing costs associated with a home equity line of credit (HELOC), which includes credit report, flood certification, settlement/closing, property ownership and encumbrances search, recording, property search, and quick close. Member is responsible for any city, county, and/or state taxes if the subject property is located in FL, LA, MD, MN, NY, TN, or VA. If an appraisal is required, the member, who is responsible for the fee whether or not the loan closes, will pay the cost.

Interest may be tax deductible, consult a tax advisor for further information regarding the tax deductibility of interest and charges.

Fixed Rate Advance Lock-In You may lock in an Annual Percentage Rate for Advances during the Advance Period. During your Advance Period, you may choose to have three separate Fixed Rate Advances locked in at any one time, with a maximum of two new Fixed Rate Advances per calendar year. Each Fixed Rate Advance must equal or exceed Ten Thousand Dollars ($10,000.00) and you may not request a Fixed Rate Advance that would cause the amount you owe to exceed your Credit Limit. The only term option for your Fixed Rate Advance is 240 months (“Fixed Rate Advance Term”). However, the term of your Fixed Rate Advance cannot exceed your Repayment Period.

Fixed Rate Advances will be amortized over the Fixed Rate Advance Term with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than 1020 ELOC OO CLTV 70 Rate % for primary residences and second homes and 4.75% for investment properties.

Property Insurance: Property insurance is required.

Multiple PenFed Loans: Multiple PenFed Equity loans and HELOCs are available as long as the member and collateral qualify (except Texas). For Equity loans and HELOCs the total indebtedness cannot exceed $500,000 for all PenFed Equity and HELOCs combined.

PenFed does not lend on:

Mobile homes
Co-ops or time-shares
Properties that are currently listed on the market for sale
Commercial property or property used for commercial purposes, even if a residence is part of the property
Undeveloped property (land only)
Properties with more than 4 units

Properties that are currently under major construction/renovations: Property must be fully livable, with no safety issues. (Examples: no missing rails from stairs/decks, no open walls with wires showing, missing kitchen appliances/counters, missing bath fixtures or unfinished pool).

Additional limitations may apply

Home Equity Line of Credit:

This Account has a Draw Period of 10 years, followed by a repayment period of 20 years.
If only minimum payments are made during the draw period, the loan balance will not decrease.
In Texas, the maximum CLTV available is 80% on owner occupied properties. Additional restrictions apply in Texas, so please ask a representative for details.
In all other states, the maximum CLTV is 85% on owner occupied properties and second homes. Additional restrictions or requirements may apply based on application characteristics.
Property type of Condo has a maximum CLTV of 80%.
The maximum CLTV available is dependent on credit qualification.
Rates vary depending on owner occupancy and CLTV and other loan criteria.

Minimum Loan Amount Requirements in all States:

For an owner occupied property or second home the minimum loan amount is $25,000 and the maximum amount is $500,000 with a CLTV of 85% or less of the fair market value.

Other terms and conditions apply; call 844-918-4307 to speak with a representative for details. All rates and offers are subject to change without notice. To receive advertised product, you must become a member of PenFed.

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VA Loans – What Makes Them Great? | PenFed Credit Union

VA Loans: What Makes Them Great?