VA Home loans. Are they worth it?

CPL Adam Schoenwald — Tue, 17 Aug 2021 13:31:18 -0400

I'm getting ready to buy my first home, and I have the option of a VA Home loan, but I have heard conflicting stories on rather it is a good option or not. I have been told by some you pay nothing down everything is covered, while others say there are better ways to get a home loan and with the VA Home Loan program there are hidden Fees and they don't pay everything up front. So what gives?

Response by SSG Private RallyPoint Member made Aug 17 at 2021 1:47 PM

SSG Private RallyPoint Member — Tue, 17 Aug 2021 13:47:04 -0400

My realtor basically explained it to me like this: The VA loan is for people with no money to put down.
There are no hidden fees in the VA loan, thats just the stuff you dont really think about, like the VA loan covers PMI and some other stuff thats normally in a regular loan.
So if you have nothing to put down, use the VA loan.
If you have a good chunk of money, go for another type of loan. Interest on loans are pretty low right now.

Response by SFC Private RallyPoint Member made Aug 17 at 2021 2:55 PM

SFC Private RallyPoint Member — Tue, 17 Aug 2021 14:55:45 -0400

You just have to run the numbers through a mortgage calculator to see which will be the better option for you.

As for a second home, the VA will only cover you for a home that will be your primary residence. You can use it over and over as you move. You can rent your home out and leave it as a VA loan. You can't take out a VA loan on a property that will not be your primary residence at the time of your application

Response by CAPT Kevin B. made Aug 17 at 2021 3:03 PM

CAPT Kevin B. — Tue, 17 Aug 2021 15:03:45 -0400

First off, there is no "VA Loan". The loan is from a financial institution, not the Feds. Second, VA only backs up the typical 20% Down Payment. You still have to qualify for the loan at full amount. People who have a regular income that meets the threshold typically qualify. VA backed loans are typically a bit higher on the APR because most are squeezing into it, hence are riskier. That's why a bit down the road you look at a conventional refinance opportunity. That isn't as likely now due to the relatively low rates. You typically refi to a conventional if you can drop the interest 1% or better. I just did that to go from 3.8 to 2.5%. Net result is making the same payment and taking about 5 years off the loan. Also, the sharks out there that advertise 1.8% have so many visible and hidden up front fees, a simple calculation would show you're better off with 2.5% with maybe a grand or two in fees. Always go through the disclosures with a fine toothed comb. For the retired folk, I recommend not paying these loans off but take that money and have a financial house make 7-8%/year on it. You'll be ahead.

Response by CPT Private RallyPoint Member made Aug 17 at 2021 4:01 PM

CPT Private RallyPoint Member — Tue, 17 Aug 2021 16:01:33 -0400

I’ve been in the finance and lending industry from car loans to home loans

I’ve been on the banks side of the equation and only looked at them from a pure cash flow time value of money calculation

Without question your VA loans are going to be packaged up and sold to long term investors. The VA is not in the business of holding loans yo maturity.

As such, every single loan they underwrite is going to conform to market pricing. Therefore whatever context the loan is framed as in terms of a PRO something else in the time value equation will have to give in.

The VA loan process help out service members who otherwise would have difficulty getting a loan but they don’t cut them any financial breaks because once the loan is made it is turned around and sold in the open market so they can make more loans.

What I’m saying is if you have a great credit score and can put 20% down the VA probably isn’t going to be your best option.

Response by SSG Private RallyPoint Member made Aug 17 at 2021 8:32 PM

SSG Private RallyPoint Member — Tue, 17 Aug 2021 20:32:35 -0400

I just used one. There were some fees I had to pay, but nothing like what I would've paid otherwise. I'm sure there may be better options for you as every person and their situation is different, but you should try a mortgage calculator. In my experience so far, I'm pleased with mine.

Response by A1C Robert Underwood made Aug 17 at 2021 9:41 PM

A1C Robert Underwood — Tue, 17 Aug 2021 21:41:16 -0400

I have bought 3 houses with VA loans over the years. Every time it has saved me a lot of $ in closing costs and other fees. Get with a realtor that deals with VA loans before you decide. Good luck to ya.