VA

VA loans are one of the only loan programs allowing buyers to purchase a house with as little as $0 down*.

For qualifying veterans, a VA mortgage will loan up to 100% of the purchase price without monthly mortgage insurance.  For this reason, it’s the best financial choice a veteran with a low down payment can make.

FHA loans have both up-front and monthly mortgage insurance, and conventional loans have monthly private mortgage insurance.  VA’s mortgage insurance is only upfront (and called a “Funding Fee”), and there is no monthly mortgage insurance.

To understand the difference in cost, it’s important to understand how the different mortgage insurance’s work.

Up-Front Mortgage Insurance is charged based on the loan amount as a percentage.  The charge is not required to be paid up-front, instead it is added onto the loan balance.  For example, if you had a loan amount of $300,000 and the up-front mortgage insurance was 2.125%, the actual amount owed on the mortgage would be $306,375.

Monthly mortgage insurance is calculated as a percentage of the loan balance divided by 12 for the monthly amount.  For Example, on a $300,000 mortgage with a MI rate of 1.1% there would be $275 per month in mortgage insurance added to the monthly payment.

Here’s a comparison between the costs of an FHA and VA mortgage:

VA Mortgage Summary

As you can see, these numbers are based on a $300,000 purchase price.  As of April 27, 2011 the VA Funding Fee and FHA Mortgage Insurance figures are accurate (1% up-front, 1.1% for monthly FHA; and 2.125% VA Funding Fee).  Looking at the graph above, you can see that the VA loan has a lower down payment of about $10,000.  Even with a higher loan amount, the monthly payment is still lower by $143.  Now lets take a look at what the savings are over 5 years:

Looking at the graph above, you’ll see that the VA loan saves $9,649 in costs over a 5 year period versus the FHA mortgage.  Let’s see what the numbers look like over a longer period of time:

As you can see, the VA loan saves $16,200 in costs over a 15 year period of time when compared to an FHA loan.

To apply for a VA loan, please call or email me.  I’d appreciate the opportunity to assist you with your financing needs!

* To have a $0 down payment, all closing costs must be paid by the seller.