When you decide to use a VA Loan, you may be excited about the prospect…
Yes! The main benefit of the VA Loan is that you can purchase a home without any down payment. That means that you can buy a home without paying anything out of pocket. It is also known as a “0% down” loan.
Other low down payment options include the FHA Loan, which can be approved with as little as 3.5% down. You can also do a conventional loan and put less than the required 20% down. But in both cases, you will need to pay for Private Mortgage Insurance (PMI) in addition to your regular monthly mortgage payment. PMI is designed to protect the lender in case you default on the loan. Your interest rate may also be higher if you have a lower down payment. With the VA Loan, however, you do not pay PMI if you have a 0% down payment.
When deciding if you want to include a down payment, you should consider the amount of the mortgage as well as your monthly payment. If you want to lower your monthly payment, putting some more down as a down payment will mean that your loan is smaller. This translates to a lower monthly payment and less interest paid over the entire life of the loan.
If you don’t want to put a down payment down when you take out the loan but decide later that you want to put more money into your home, you can make extra payments toward principal. Known as Principal Only payments, these pay down the balance of your loan. This reduces the amount of money that you pay interest on and can significantly reduce the length of your loan and the overall amount that you will pay. There is no penalty for paying of your VA Loan early.