VA Loans – Lowest Rates & Lowest Down-Payment Requirements: Always A Good Thing?

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I love the VA loan program for all the obvious reasons.   Our veterans deserve to have access to low-interest rates and low down-payment requirements.  The sacrifices our military men and women make demand the best we have to offer in affordable housing and mortgages.

Equity Prime Mortgage - Mike Nelson
27 Months In A Row: VA Mortgage Rates Beat Everything – Mortgage Reports

Low Interest Rates & Low Down-Payment Requirements: Always A Good Thing?

The answer to the first part of the question is a resounding yes.  Low interest rates are always a good thing.  Remember, the goal of a mortgage is to pay the lowest amount of interest while increasing the amount of home equity with each payment.  Mortgages are expensive and reducing interest cost is a good thing.

But What About Low-Down Payments?

As a general rule, I recommend my customers pay the largest down-payment they can “afford”.  In this case “afford” means both monthly cash flow and impact on savings.  As a reminder, a larger down-payment means the borrower will have a smaller monthly payment.  Additionally, a larger down payment will give the borrower more equity in the home.

Equity Prime Mortgage - Mike Nelson
Should your VA customers make a down payment? Written by Ryan Smith

Let’s Look At The VA Loan As An Example

A VA loan does indeed have lowinterest rates compared to conventional loans.  One key difference however, is the up-front funding fee that a VA loan requires.  The upfront funding fee is calculated as % of the loan amount.  Naturally, the funding fee is much greater with a low down-payment mortgage.  Check out the article linked to the right for more information.

A Larger Down-Payment With A VA Loan Has 2 Benefits

A larger down-payment will give the borrower two significant benefits.  First, the funding fee will be less because the principal amount is smaller.  Second, the smaller principal amount will yield dramatic savings in interest expense over the life of the loan.

Of course, there are exceptions to my example.  If a veteran believes he or she will sell the house in the short-term, then preservation of savings with a low down-payment, or other adjustable loan products, might be a better option.

Remember, a loan is personal.  Make sure you work with a real estate agent and a lender who are interested in  your specific circumstances.  Please feel free to text, call, or e-mail anytime – I love the dialog.

As always, Happy House Hunting.

Mike
mnelson@equityprime.com
720.213.6260 (voice & text)
@michaelfnelson2
NMLS: 1314188
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