Disadvantages of a VA Loan Financing Fee: While you won't pay for mortgage insurance with a VA loan, you will pay a closing financing fee (although this charge can be funded on your loan, which increases the total amount you owe). Once you move into the house, you will own a 100% funded property. When the VA funding fee is added to the loan amount, you will actually be in a negative equity position right from the start. VA loans don't have prepayment penalties.
You can pay off your mortgage early or make additional payments without fear of being financially penalized. One of the biggest negatives of VA home loans is the potential loss of attractiveness for home sellers. Since VA home loans are subject to strict appraisal, this can sometimes make a home seller feel uncomfortable, especially if they have never sold to a VA homebuyer in the past. VA mortgage loans generally cause more bank appraisal problems than FHA loans or conventional loans, so some sellers can avoid them at all costs.
Before diving into the pros and cons of taking on a VA loan, here's a quick reminder of what a VA loan assumption is and who is eligible. Depending on whether you are the buyer of the home or the seller of the home, there are reasons for and against taking out a VA loan. Buyers should carefully consider all loan options, because assuming that a VA loan may not work in their favor. It is highly recommended to consult a loan specialist with experience in taking out VA loans.
Did you know that, as a disabled veteran, you may be eligible for special considerations when obtaining a loan from the VA? It's true. There are many benefits to using a VA loan to buy a home. On the one hand, they don't require a down payment or private mortgage insurance. In addition, you can expect lower than average interest rates, with no prepayment penalty and less stringent credit and income requirements than other mortgage options.
Obviously, one disadvantage of this loan product is that it only applies to veterans and their spouses. This means that eligibility is limited and that the program is not open to many borrowers.