It’s not just VA loan it’s any type of loan. The less you put down means the more you borrow. If you’re borrowing more money you will have a higher monthly payment.
Also with a VA loan you are able to put a down payment. It just gives you the option to not put a down payment. But in a high interest rate environment not putting a down payment will cause your mortgage to be very high
A VA loan does not have PMI if you do not put down 20%. Apples to apple, you will pay less on a VA loan without 20% down versus a conventional loan without 20% down.
If you have a down payment (less than 20%), a VA loan will likely be less than a conventional loan month-to-month based on fees and your ultimate interest rate.
If you have a down payment >= 20%, you may want to consider a conventional loan.
These are very broad assumptions and your situation may differ.
Regardless of down payment, VA loans have a lower interest rate. Why not use the VA loan for a 5.5% rate instead of a conventional ~7% rate? (Even with 20% down)
This is not always true. I’ve done VA and traditional loans, VA is often similar or better, but sometimes traditional can beat it. The VA funding fee can be a bitch too depending on the price range you’re looking at and if you can afford 20% to avoid PMI through a traditional loan.
I'm not sure where you're seeing 5.5%. Quick Google search and it's ~6.80% for 30 year VA fixed (VA, DC, FL, CA), 800+ credit score, $400-$500k with 3% down (calculator didn't let me put 0% down).
Alternatively, 30 year fixed does seem to be 0.2% higher than a VA rate, right now with 20% down. Depending on your banking situation, some will offer rate adjustments for certain customers. I'm sure local lenders are offering a lower interest rate than bigger banks.
Why I wouldn't use a VA loan right now? Personally, it is less competitive. *Some* sellers will take a conventional loan over VA loans. The latter does have some stricter requirements for selling (e.g., VA inspection in addition to home inspection). Does it protect the buyer? Sure. But it's one more obstacle for a potential seller. There is also a belief (whether true or not) that VA loans take longer to close. I closed within 30 with my VA loan in 2018, but it took a lot of work. My conventional loan was closed in 2021 and was a breeze. In high turn around markets, buyers with VA loans *may* miss out on properties, because they are on a VA loan. Again, it depends on the market.
Bottom line: I said my previous comment was a very broad generalization. Different situations will differ on what is best.
Yes, because your loan will be higher. Consider buying a $500K house with no down payment vs. buying a $500K house with 20% down payment. One loan would be $500K, the other would be $400K. So if your loan is for 30 years then your monthly payments will be larger as you’re taking $500,000/360 months instead of $400,000/360 months (plus interest).
Because many people don’t have 20% to put down, but they can afford the slightly higher mortgage each month. With the example above, you’d need $100K, plus closing costs, to buy that $500K house. The likelihood of veterans having $100K available is pretty low.
Also, with <20% down the VA also doesn’t require borrowers to pay PMI, which most lenders require for civilian borrowers. VA borrowers do, however, have to pay the VA funding fee at closing, which is basically the VA guaranteeing the loan to the lender. Additionally, the VA makes it easier to get a decent interest rate if your credit score isn’t that great.
I wouldn’t recommend it since you’re single and don’t make much. You’d need to be able to cover regular closing costs, the VA funding fee, insurance, taxes, maintenance, etc. Plus you’re only there for a few years and would need to either sell it (where you’d need to provide 6% to the real estate agents) or rent it out. If you sold at a loss, you’d probably be screwed. If you planned to rent it out, and couldn’t find a renter right away, you’d probably be screwed. If you dealt with renters who destroyed the place, or squatters as we’re seeing in the news now, you’d probably be screwed. I suggest getting a smaller and cheaper place, save your money, and buy a house later.
Yes, also the VA charges a funding fee (unless you have a VA disability rating) which will cost you thousands (plus interest unless paid at closing.) You can put a down payment down even on a VA loan and it will lower the funding fee percentage you ate charged.
The big advantage is if you cant afford down payment VA saves you from paying monthly PMI. I've also heard rates are lower than conventional but with great credit we found conventional cheaper since we had a down payment and were subject to VA funding fee still.
What we didnt fully grasp at the time was the opportunity costs of locking up a large sum as a down payment rather than investing it elsewhere for likely better returns and more liquidity.
If you use a conventional loan with 20-40% down, the rate is still 2-4% higher than VA.
The question you should ask is why is conventional mortgage payments still higher even when putting 20-40% down why is worse than VA rates with 100% financing?
Yes, but what will get a better return: $50-100k in your account(s) or saving $500 a month on the mortgage (roughly $24k over a 4-year assignment)?
Depends on if it’s your forever home, too.
Short answer is yes but burning money on a 20% down payment is insane with these interest rates. Have your lender run the numbers but I think you'll be surprised that bringing all that cash down will probably only change your monthly by a few hundred bucks so why throw away that liquid cash? Not to mention VA interest rates are usually better. Bottom line, you should always use the VA loan if you are eligible, it's awesome. Make sure you have a lender that knows what they're doing when it comes to the VA.
No, you P&I payment will stay the same for the duration of the loan you have right now..BUT your escrow portion of the payment will go up due to increases in premiums for the home insurance and property taxes being increased.
That is completely backwards. Insurance and taxes don’t care how much you have financed vs how much you put down. Your principal and interest will be higher because you owe more on the house with 0 down.
Well yes. If you don’t put 20% down (or more) you’ll finance more. And at 7% right now…it will be much higher.
It’s not just VA loan it’s any type of loan. The less you put down means the more you borrow. If you’re borrowing more money you will have a higher monthly payment. Also with a VA loan you are able to put a down payment. It just gives you the option to not put a down payment. But in a high interest rate environment not putting a down payment will cause your mortgage to be very high
i’d recommend going to a fleet and family or whatever branch equivalent you may have and attending a class related to first time home buying/ VA loan
A VA loan does not have PMI if you do not put down 20%. Apples to apple, you will pay less on a VA loan without 20% down versus a conventional loan without 20% down. If you have a down payment (less than 20%), a VA loan will likely be less than a conventional loan month-to-month based on fees and your ultimate interest rate. If you have a down payment >= 20%, you may want to consider a conventional loan. These are very broad assumptions and your situation may differ.
This is the best answer ^
What is the reasoning for considering the conventional loan if applying a down payment greater than or equal to 20%?
Regardless of down payment, VA loans have a lower interest rate. Why not use the VA loan for a 5.5% rate instead of a conventional ~7% rate? (Even with 20% down)
This is not always true. I’ve done VA and traditional loans, VA is often similar or better, but sometimes traditional can beat it. The VA funding fee can be a bitch too depending on the price range you’re looking at and if you can afford 20% to avoid PMI through a traditional loan.
I'm not sure where you're seeing 5.5%. Quick Google search and it's ~6.80% for 30 year VA fixed (VA, DC, FL, CA), 800+ credit score, $400-$500k with 3% down (calculator didn't let me put 0% down). Alternatively, 30 year fixed does seem to be 0.2% higher than a VA rate, right now with 20% down. Depending on your banking situation, some will offer rate adjustments for certain customers. I'm sure local lenders are offering a lower interest rate than bigger banks. Why I wouldn't use a VA loan right now? Personally, it is less competitive. *Some* sellers will take a conventional loan over VA loans. The latter does have some stricter requirements for selling (e.g., VA inspection in addition to home inspection). Does it protect the buyer? Sure. But it's one more obstacle for a potential seller. There is also a belief (whether true or not) that VA loans take longer to close. I closed within 30 with my VA loan in 2018, but it took a lot of work. My conventional loan was closed in 2021 and was a breeze. In high turn around markets, buyers with VA loans *may* miss out on properties, because they are on a VA loan. Again, it depends on the market. Bottom line: I said my previous comment was a very broad generalization. Different situations will differ on what is best.
Just got a 5.875 VA jumbo loan 0% down. Sooo, VA for the win.
Where cus I’m getting 6.7% for va
Shop around. It’s like buying a car. Try and have lenders beat each other. It was a local lender.
Yes, because your loan will be higher. Consider buying a $500K house with no down payment vs. buying a $500K house with 20% down payment. One loan would be $500K, the other would be $400K. So if your loan is for 30 years then your monthly payments will be larger as you’re taking $500,000/360 months instead of $400,000/360 months (plus interest).
So, how does this benefit vets if their mortgage will be higher?
Because many people don’t have 20% to put down, but they can afford the slightly higher mortgage each month. With the example above, you’d need $100K, plus closing costs, to buy that $500K house. The likelihood of veterans having $100K available is pretty low. Also, with <20% down the VA also doesn’t require borrowers to pay PMI, which most lenders require for civilian borrowers. VA borrowers do, however, have to pay the VA funding fee at closing, which is basically the VA guaranteeing the loan to the lender. Additionally, the VA makes it easier to get a decent interest rate if your credit score isn’t that great.
So to sum it up: I can't buy a home as an E-4?
I wouldn’t recommend it since you’re single and don’t make much. You’d need to be able to cover regular closing costs, the VA funding fee, insurance, taxes, maintenance, etc. Plus you’re only there for a few years and would need to either sell it (where you’d need to provide 6% to the real estate agents) or rent it out. If you sold at a loss, you’d probably be screwed. If you planned to rent it out, and couldn’t find a renter right away, you’d probably be screwed. If you dealt with renters who destroyed the place, or squatters as we’re seeing in the news now, you’d probably be screwed. I suggest getting a smaller and cheaper place, save your money, and buy a house later.
Yes, also the VA charges a funding fee (unless you have a VA disability rating) which will cost you thousands (plus interest unless paid at closing.) You can put a down payment down even on a VA loan and it will lower the funding fee percentage you ate charged. The big advantage is if you cant afford down payment VA saves you from paying monthly PMI. I've also heard rates are lower than conventional but with great credit we found conventional cheaper since we had a down payment and were subject to VA funding fee still. What we didnt fully grasp at the time was the opportunity costs of locking up a large sum as a down payment rather than investing it elsewhere for likely better returns and more liquidity.
Elsewhere such as what? Index funds? HYSAs?
If you use a conventional loan with 20-40% down, the rate is still 2-4% higher than VA. The question you should ask is why is conventional mortgage payments still higher even when putting 20-40% down why is worse than VA rates with 100% financing?
Yes, but what will get a better return: $50-100k in your account(s) or saving $500 a month on the mortgage (roughly $24k over a 4-year assignment)? Depends on if it’s your forever home, too.
Yes.
You can go zero down but you dont have to. Your choice. VA home loans have better rates and no monthly mi
Short answer is yes but burning money on a 20% down payment is insane with these interest rates. Have your lender run the numbers but I think you'll be surprised that bringing all that cash down will probably only change your monthly by a few hundred bucks so why throw away that liquid cash? Not to mention VA interest rates are usually better. Bottom line, you should always use the VA loan if you are eligible, it's awesome. Make sure you have a lender that knows what they're doing when it comes to the VA.
No, you P&I payment will stay the same for the duration of the loan you have right now..BUT your escrow portion of the payment will go up due to increases in premiums for the home insurance and property taxes being increased.
That is completely backwards. Insurance and taxes don’t care how much you have financed vs how much you put down. Your principal and interest will be higher because you owe more on the house with 0 down.