What is a VA Loan, and How Does it Work?
You’ve served our country, now let us serve you.
VA loans are a mortgage option issued by private lenders, with a partial backing or guarantee by the Department of Veteran Affairs. The loan effectively lets us in the private sector play our part in helping you live a better life as a sign of gratitude for your service to the country.
For most military borrowers, VA loans are the most powerful lending programs available. However, not many seasoned VA borrowers understand the program’s unique benefits, making them far better than conventional loans.
Megastar Financial has become the preferred provider for VA loans in Redding, CA, and the rest of Northern California. Each month, we’re providing five to seven loan products in Redding alone.
Understanding VA Loans
We will discuss the characteristics, benefits, and drawbacks of VA loans that you should know. Understanding the loans can help you make a more well-informed decision regarding your mortgage loan.
Characteristics of VA Loans
VA loans have several characteristics that can set them apart from conventional loans, including:
- The unique loan product does not always require a down payment.
- A borrower is relieved from the mortgage insurance payment.
- If you borrow a VA loan for the first time, you may have to put down 2.15% of the loan amount.
- Past and current members of the US armed forces, and their surviving spouses, are eligible for this loan.
Benefits That Most Borrowers Don’t Know About VA Home Loans
Besides the unique characteristics, there are certain intricacies about VA Home loans that many regular borrowers might not know, including:
- VA loans are primarily for residential properties, but there are exceptions where you can purchase multiunit property or duplex, provided that you live in one of the units, allowing you to use it as a means to generate income by renting out the other units.
- You can reuse the loan as many times as you need, provided that you pay off the loan each time. It is also possible to obtain another VA loan if you have lost one to foreclosure or have an existing loan.
- VA home loans are available despite bankruptcy or foreclosure. It means that even veterans with a history of bankruptcy or foreclosure can secure a loan, unlike with conventional loans.
- There is no limit to how much you can borrow. If you qualify for the loan, you can borrow as much as the lender is willing to provide without the need for a down payment.
- VA loans do not come with any prepayment penalties.
Drawbacks of VA Loans You Should Know
- Like any loan product, VA loans also have certain drawbacks that you should know before you apply for one, including:
- VA loans do not come with mortgage insurance payments or down payments. However, you still need to pay the VA funding fee. The money you pay goes towards financing the loan program for future generations.
- If you want to purchase a secondary home beside the one you live in, you will need to get a conventional loan.
- Not all sellers in the real estate market are willing to cooperate with buyers from this loan programs. There are certain misconceptions regarding these programs, and sellers often mistakenly believe that they will not get a good deal from a buyer using a the loan.
Get Your VA Loan in Redding, CA, Through Megastar Financial
Megastar Financial is a trusted provider of VA loans in Redding, CA. If you are a veteran seeking a loan, you can always stop by our office and let our experts help you find the perfect product to suit your needs.
If you want more information over the phone before heading down to our office, you can call us at (530) 999-9000.
MEGASTAR FINANCIAL CORP. is an Equal Housing Lender. DBO Lic # 603 G365 NMLS Lic # 235828(3043)*
Licensed by the Department of Business Oversight (DBO) under the California Finance Lenders Act * NMLS # 1162668.
As prohibited by federal law, we do not engage in business practices that discriminate on the basis of race, color, religion, national origin, sex, sexual preference, marital status, age (provided you have the capacity to enter into a binding contract), because all or part of your income may be derived from any public assistance program, or because you have, in good faith, exercised any right under the Consumer Credit Protection Act. We are regulated by the Fair Housing Act (overseen by HUD) and the Equal Credit Opportunity Act (overseen by CFPB), Washington, DC, 20580.
Example of 30 year mortgage:
$300,000 sales price, $60,000 down payment, $240,000 loan amount, 360 months, 3% interest rate, 3.132% APR, $1,029 Principle and Interest monthly payments, Payment does not include taxes, insurance premiums or HOA dues. The actual payment amount will be greater. Rates shown valid on publication date of June 29th, 2020. This example is for a conventional, not jumbo, mortgage product; there are restrictive upper loan amounts for conventional loans based on the property’s location. Example given requires a minimum 740 credit score with a debt to income ratio of under 45%. Applicant must be employed. This is not a promise to lend. All terms and conditions are based on the subject property, the applicant’s credit worthiness and the applicant’s ability to repay the loan.
15-Year Fixed-Rate Mortgage:
The payment on a $300,000 15-year fixed-rate loan at 2.723% and 80% loan-to-value ratio (LTV) is $1,626. The annual percentage rate (APR) is 3.178%. Payment does not include taxes and insurance premiums. The actual payment amount will be greater. Rates shown valid on publication date of June 29th, 2020. This example is for a conventional, not jumbo, mortgage product; there are restrictive upper loan amounts for conventional loans based on the property’s location. Example given requires a minimum 740 credit score with a debt to income ratio of under 45%. Applicant must be employed. This is not a promise to lend. All terms and conditions are based on the subject property, the applicant’s credit worthiness and the applicant’s ability to repay the loan.