Pentagon Federal Credit Union
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MORTGAGE KNOWLEDGE CENTER

PenFed Mortgage with Confidence

Home Buying Steps

  • Getting Started
  • Finding a Home
  • Getting a Mortgage
  • Home Ownership

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  • VA Loans
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image

VA LOANS

Rates starting at % (APR %)¹

 

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

  1. Home
  2. Mortgage Knowledge Center
  3. What Are the Pros and Cons of VA Loans?

MORTGAGE

What Are the Pros and Cons of VA Loans?

What you'll learn: If a VA loan is right for you after considering the pros and cons

EXPECTED READ TIME: 3 MINUTES

Updated April 7, 2023

If you served or are serving in the Military, National Guard, or Reserve and are eligible, a VA loan can be a really attractive option when planning to buy a home. The fact that VA loans require little to no down payment can become a major factor in getting into your dream home. Despite a long list of benefits, a VA loan may not be right for everyone. Let's take a look at the advantages and disadvantages of a VA loan so you can make a fully informed decision.

What is a VA loan?

VA loans are government-backed loans that offer highly competitive interest rates with little to no down payment required.

Who is eligible for a VA loan?

The U.S. Department of Veterans Affairs is a great place to start to determine the eligibility requirements for a VA loan. To be eligible for a VA loan, you generally need to be able to confirm one of the following:

  • You have served 90 consecutive days of active service during wartime.
  • You have served 181 days of active service during peacetime.
  • You have six years of service in the Reserves or National Guard.
  • You are the spouse of a service member that has died in the line of duty or as a result of a service-related injury. 

What are some of the advantages of a VA loan?

If you qualify, there is a long list of benefits that make VA loans an beneficial over a conventional loan. VA loans typically offer the following:

  • VA loans offer better terms and interest rates than most other home loans.
  • 100% financing — typically, there is no down payment required for a VA loan, as long as the purchase sales price of the home does not exceed the appraised value of the home.
  • There is no need for private mortgage insurance (PMI) or mortgage insurance premium (MIP). PMI is designed to protect a lender when the down payment for a home is less than 20% of the mortgage amount and MIP Federal Housing Administration (FHA) requires to self-insure your loan against potential loss.
  • There is no penalty for paying off the loan early.

What are some of the disadvantages of a VA loan?

Even with all of those advantages, there are some factors you need to be aware of before deciding to get a VA loan:

  • You will be required to pay VA funding fees. This is a one-time payment that helps to lower the cost of the loan for U.S. taxpayers, since the VA home loam program does not require downpayments or monthly mortgage insurance.
  • Consider the total cost of loan compared to total cost of house. Since you need to factor in the cost of the VA funding fee, you could ultimately end up with a loan that exceeds the market value of your house.
  • Manufactured homes may require a minimum down payment and may not be eligible for a 30-year term.
  • You cannot use a VA loan for rental properties.

Is a VA loan better than a conventional loan?

Ultimately, the answer to this question depends upon your unique circumstances and your financial situation. With the option of 100% financing, better terms, and lower interest rates, you should consider your eligibility, options, and work with your lender to determine the best loan for your situation.

the Mortgage Center

For more information about PenFed Mortgages:
 

PenFed Mortgage: 

800-970-7766

Get Started

SIMILAR ARTICLES

10 Things New Homebuyers Need to Know

There are a lot of things new homebuyers need to know. Here are 10 things you should consider when buying a home.
couple unpacking and looking out window of home

10 Reasons Why You Should Get a VA Loan

The benefits of a VA Loan can be a great option for military families and veterans. Learn about the reasons why you should get a VA Loan from PenFed Credit Union.
military personnel being handed keys to new home

Can I Refinance a VA Loan?

A VA Loan can improve your financial situation, especially when it’s time to refinance your home. PenFed explains how to approach the VA refinance process and your best options.
service member discussing refinancing a mortgage

What Are the Different Types of Mortgages?

There are different types of mortgages for all financial situations. PenFed Credit Union provides details on different mortgages and which might be right for you.
couple researching on laptop together
image

VA LOANS

Rates starting at % (APR %)¹

 

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

Home Buying Steps

  • Getting Started
  • Finding a Home
  • Getting a Mortgage
  • Home Ownership

Mortgage Topics

  • VA Loans
  • Conventional Loans
  • First Time Homebuyer
  • Home Equity
  • Homebuying 101
  • Checklists
  • Adjustable Rate Mortgages
  • PenFed Top 10
  • Refinance
  • Jumbo Loans
  • FHA
  • Videos

Mortgage Products

  • Mortgage Center
  • Refinancing
  • Home Equity

PenFed HELOC

Rates as Low as % APR* with flexible use of funds

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

VA 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 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 % as of . 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 % 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 % 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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This credit union is federally insured by the National Credit Union Administration. Rates are current as of September 2023 unless otherwise noted and are subject to change.

APY = Annual Percentage Yield
APR = Annual Percentage Rate


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IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party Website that is not a part of Pentagon Federal Credit Union.


The content you are about to view is produced by a third party unaffiliated to Pentagon Federal Credit Union. PenFed takes no responsibility for the content of the page.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party site. PenFed Realty, LLC is wholly owned by PenFed and this referral may provide PenFed a financial or other benefit.


For more information about the relationship between PenFed and PenFed Realty, LLC, see the Affiliate Business Arrangement Disclosure.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party Website.


The content you are about to view is produced by a third party website that is unaffiliated to Pentagon Federal Credit Union. PenFed takes no responsibility for the content of the page.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party site. PenFed Title, LLC is wholly owned by PenFed and this referral may provide PenFed a financial or other benefit.


For more information about the relationship between PenFed and PenFed Title, LLC, see the Affiliate Business Arrangement Disclosure.


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