People who currently serve in the military or did in the past might be eligible for a veteran affairs (VA) loan. If you are eligible, you might wonder if this is the right loan for your situation. Here are several key points about VA loans that you should understand before deciding if this is the right loan program for you.

VA Loans: What Are They?

Before pursuing any loan type, you might want to know that VA loans are designed for veterans that want to become homeowners. The Department of Veterans Affairs is an entity that makes these loans possible, as they back the loans. Backing a loan means that lenders have fewer risks when issuing them. When borrowers default and lose their properties, the Department of Veterans Affairs pays the money the lenders lost through the deals. As a result, lenders generally have nothing to lose when issuing VA loans.

VA Loans Have Favorable Terms

The second thing to know is that VA loans have favorable terms. The interest rates on VA loans are competitive. If you compare the current rates on these loans versus other types, you will see similar rates. Secondly, you will not need a huge down payment to purchase a home with a VA loan. Instead, you can buy a house with no money down. Putting some money down is a better idea, though, as it helps lower your payments and pay fewer fees. You will also save money in interest if you put some money down.

They Have Reasonable Closing Costs

The other vital thing to know is that VA loans have reasonable closing costs. Closing costs are a normal part of every mortgage loan program, but VA closing costs might be lower than other loan types. You can compare the closing costs of other loan programs if you are interested in learning more.

Next, you can roll the closing costs into your loan. If you cannot afford to pay cash upfront for these fees, you can finance them. You will have to pay a funding fee to the VA when taking the loan. You pay this fee just one time, and it helps the VA continue to guarantee loans to other veterans. The fee amount depends on your down payment amount. If you want to pay a lower fee, put a larger down payment on the purchase.

Are you excited to buy a house? If so, you can pursue a VA loan if you feel it is right for you. For more information, contact a VA loan financing service.