Crucial Facts About Military Mortgages
Military mortgages are tailored to help those who work in the defense forces, such as the Navy and Air Force, acquire homes. It is also referred to as a VA loan program. Unlike the other traditional home loans offered by financial institutions, these are supported by the government. This kind of mortgage is obtainable to all members of the military.
Here are some of the main facts that set military mortgages except other types of loans.
No Down Payment is required
Building up credit is an uphill task for most service members, as they are regularly on the move. As a consequence, this program provides 100% financing without requesting that the applicants make a down payment.
Most financial institutions require applicants to commit themselves to paying a private monthly mortgage insurance premium if they are not in a position to pay 20% of the total loan beforehand as a down payment. The insurance policy is designed to protect the lenders in case the borrower defaults on the loan. Luckily, members of the defense forces do not need an insurance policy, as their loan is covered by the federal government. The government acts as a signatory, meaning that if the soldier defaults, the government will repay the lender. It is also important to point out that the VA program gives one an excellent opportunity to build up home equity over an extended period.
Competitive and Affordable Interest Rates
Two of the main factors that edges use to determine the most appropriate interest rate are the client’s financial capability and credit score. Because the government covers this kind of home financing, less risk is transferred to the lender and this, in turn, enables them to offer competitive interest rates.
Lenders impose a pre-payment penalty on clients who repay the loan before it matures. This is because clients paying early denies lenders the opportunity to collect recurring interest payments. The penalty helps them retrieve some of the money. Luckily, VA programs allow one to repay the complete amount borrowed to buy a house at any time, and no penalties are imposed. This gives one a chance to start considering and planning for future home purchases in addition as different refinancing options.
Finally, the lenders consider the basic allowance for housing when calculating an applicant’s active income. This method that military personnel can use this assistance to pay their monthly premiums. Some of the factors that determine the BAH include the number of dependents, pay grade, and geographical location. Indeed, military mortgages give soldiers an opportunity to buy homes for their families conveniently and affordably. It is also an excellent way for the government to show appreciation to the people who work day and night tirelessly to promote peace and security around the world.