I am a servicemember or veteran and I have decided to purchase a home. How do I know if a VA loan is the right fit for me?

You should consider the advantages and disadvantages of getting a U.S. Department of Veterans Affairs (VA)-guaranteed loan. Some of the advantages, once you qualify, include the ability to buy a home with no down payment (as long as the sales price doesn’t exceed the appraised value), as well as the absence of the private mortgage insurance (PMI) requirement. PMI may cost up to one percent of the loan amount each year. The VA loan program also limits the closing costs you may be charged and gives you the right to prepay your mortgage without a penalty. Also, the VA may be able to offer you some assistance if you run into temporary financial difficulties.

There may be disadvantages to a VA loan. For example, a VA loan could have a higher interest rate than a conventional loan, although interest rates on VA loans are negotiable. In addition, most borrowers are required to pay a VA loan funding fee (currently between one and three percent of the amount of the loan). Also, opting for a loan without a down payment makes it important that you plan to stay in the home for a while because a drop in home values could quickly put you “upside down” on your mortgage, leaving you owing more than the home is worth. The larger the down payment you are able to make, the more cushion you have to prevent this from happening. For more information go to the VA’s home loan program’s website or contact your local legal assistance office.

Do your homework! Your real estate agent, broker or lender may not always understand the unique needs of servicemembers and their families.

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