Eligible Veterans and other homebuyers who qualify for a VA loan are often not required to pay a down payment. Conventional loans typically require homebuyers to settle a 20% down payment. The U.S. Department of Veterans Affairs (VA) has made homeownership more affordable for Veterans in gratitude for their dedication in serving the country. However, Veterans need to settle several one-time expenses when buying a home.
Aside from a zero-down payment, there are notable reasons why Veterans consider a VA loan instead of other government-backed and conventional loans. Eligible Veteran homebuyers take advantage of the VA loans mainly because it gives them better terms and interest rates. Compared with regular homebuyers, Veterans can obtain other attractive loan benefits with VA-backed home loans and they are not required to have private mortgage insurance or mortgage insurance premiums.
Although VA loans make homeownership more affordable, first-time Veteran homebuyers should be aware of these one-time or non-recurring expenses they need to pay upfront so they can prepare their budget and avoid surprises along the way to homeownership:
- Earnest money deposit – is a cash deposit on an escrow Veterans need to settle to secure the home he or she wishes to buy. Depending on the local custom, earnest deposits can go around 1 to 2 percent of the total home value.
- Home inspection – Veterans are also required to shoulder internal and external inspections of the home they’re going to buy. The average cost of a home inspection is around $315, and it can go higher in larger homes.
- VA funding fees – Veteran homebuyers who enjoy a zero-down payment and no monthly mortgage insurance from taking a VA loan are required to pay a funding fee that can cost around 2% of the total home value. However, Veterans who receive service-related disability compensations are not required to pay funding fees.
- Closing costs – is the highest upfront amount Veteran homebuyers need to pay. Closing fees cover all the services required in buying a home. Closing a VA loan can range from around 3 to 6 percent of the total loan amount. However, Veterans may want to compare or negotiate closing rates with the lender or have it paid by the seller.
- Moving expenses – Veteran homebuyers are expected to pay for their moving expenses. Factors like location, the weight of the shipment, distance, and extra services may affect moving expenses. Veterans may want to compare moving rates, especially if the home they are buying is in another state to get the most competitive moving price.
If you obtain a VA-backed home loan as a Veteran, you may build a new home, buy a 1-4 unit single-family home, buy a manufactured home or lot, or buy a condo in a VA-approved project. You can also use your VA loan benefit several times and it even allows you to take over a loan from a seller of a VA-backed home loan if you decide not to take a new mortgage.
Get help from a professional RPM Mortgage loan advisor
Taking advantage of your VA home loan benefit is advisable especially if you are a homebuyer looking for a quality and yet affordable home. However, if you’re new in the market, a professional RPM Mortgage loan advisor can offer you invaluable insights to better understand your options as a first-time Veteran homebuyer.