Crucial Facts About Military Mortgages

Military mortgages are designed to help those who work in defense forces, such as the Navy and Air Force, purchase homes. It is also known as a VA loan program. Unlike the other conventional home loans offered by financial institutions, these are backed by the government. This type of mortgage is available to all members of the military.

Here are some of the main facts that differentiate military mortgages from other types of loans.

No down payment required

Building credit is an uphill task for most service members as they are constantly on the go. As a result, this program provides 100% financing without requiring applicants to make a down payment.

mortgage insurance

Most financial institutions require applicants to commit to a monthly private mortgage insurance premium if they are unable to pay 20% of the total loan upfront as a down payment. The insurance policy is designed to protect lenders in case the borrower defaults on the loan. Fortunately, members of the defense forces do not need an insurance policy, since their loan is covered by the federal government. The government acts as signatory, which means that if the soldier doesn’t pay, the government will pay the lender. It is also important to note that the VA program provides an excellent opportunity to build equity in your home over an extended period of time.

Competitive and affordable interest rates

Two of the main factors that banks use to determine the most appropriate interest rate are the client’s financial capacity and credit rating. Because this type of home financing is covered by the government, less risk is transferred to the lender and this, in turn, allows them to offer competitive interest rates.

Prepayment Penalties

Lenders impose a prepayment penalty on customers who pay off the loan before it is due. This is because customers who pay early deny lenders the opportunity to collect recurring interest payments. The sanction helps them recover part of the money. Fortunately, VA programs allow one to repay the full amount borrowed to purchase a home at any time and there are no penalties. This gives one the opportunity to begin considering and planning for future home purchases, as well as alternative refinancing options.

Finally, lenders consider the basic housing allowance when calculating the applicant’s active income. This means that military personnel can use this benefit to pay their monthly premiums. Some of the factors that determine the BAH include the number of dependents, country grade, and geographic location. In fact, military mortgages give soldiers the opportunity to conveniently and affordably purchase homes for their families. It’s also a great way for the government to show appreciation to the people who work tirelessly day and night to promote peace and security around the world.