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 conventional home loans offered by financial institutions, these are supported by the government. This type of mortgage is available to all members of the military.
Here are some of the main facts that set military mortgages apart from other types of loans.
No Down Payment is required
Building up credit is an uphill task for most service members, as they are constantly on the move. As a result, 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 accumulate home equity over an extended period.
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 capability and credit score. Because the government covers this type 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 recover some of the money. Luckily, VA programs allow one to repay the entire amount borrowed to purchase a house at any time, and no penalties are imposed. This gives one a chance to start considering and planning for future home purchases as well as alternative refinancing options.
Finally, the lenders consider the basic allowance for housing when calculating an 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, pay grade, and geographical location. Indeed, military mortgages give soldiers an opportunity to purchase 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.