VA Loans: The Pros and Cons
Written by: Nathan Gillan
Created in 1944, VA loans were originally part of a government program created to help veterans purchase homes with eased credit requirements and low down payments. Today, they serve the same purpose, and are becoming increasingly popular among returning service members.
Eligible individuals for a VA loan are active members of the military, veterans in uniform for a set amount of time, reservists, National Guard, and un-remarried spouses of military members who died in service or due to a service-connected disability.
Pros:
- 0% down payment
- No private mortgage insurance (PMI)
- No minimum credit scores
- No loan limits
- No prepayment penalty (easier to pay the loan off early)
- Higher debt-to-income ratio accepted
- Qualifying individuals can be eligible even 2 years after foreclosure or bankruptcy
- Great refinancing options:
- Streamline Refinance – homeowners with existing VA loans
- VA Cash-Out Refinance – Both VA and non-VA homeowners can refinance and get cash at closing to pay other debts
- Both lead to low closing costs
Cons:
- Only available to eligible service members
- Mandatory VA funding fee
- Loan + funding fee could cost more than the house
- Intended for primary homes only (no second homes or investment properties)
- Due to the misconceptions of VA loans, sellers are not always on board
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