Hammond Residential Real Estate
Michael Rothstein, GRI , Hammond Residential Real EstatePhone: (617) 470-3165
Email: [email protected]

The Major Benefits & Drawbacks to VA Loans

by Michael Rothstein, GRI 09/19/2022

If you're a veteran, a VA loan might seem like the perfect option for financing a home. However, there are some important differences between VA and conventional loans which could affect your decision. Here are some of the major pros and cons of VA loans to help you make the best financial choice:

VA Loan Pros

No Down Payment

VA loans do not require a down payment, which could potentially save you thousands of dollars on your home purchase. Conventional loans require down payments of a minimum of 3% of the home's purchase price, and higher down payments are often encouraged in tough markets. However, with a VA loan you can skip the down payment step.

No PMI

Private Mortgage Insurance is required by lenders if you fail to meet a specific financial criteria. Examples could be a lower than normal down payment, low credit score or a high debt-to-income ratio. The policy protects the lender in case you default on the loan. VA loans don't require you to buy a PMI policy, saving you time and money.

No Prepayment Penalty

Some loan options on the market charge a penalty for paying off your mortgage before the end of its established term. VA loans don't have any penalties for prepayment, so you're free to spend your money however you choose.

VA Loan Cons

VA Funding Fee

VA loans do come with a specific upfront cost called a funding fee. Funding fees go toward keeping VA loans available to future veterans. There are some ways to be exempt from paying the fee, but it's a mandatory expense in most cases.

Primary Residences Only

Another major drawback to VA loans is that they are restricted based on property use. You can only use a VA loan to finance a primary residence. Therefore, you couldn't use it to buy a vacation home, rental property or other type of investment.

Is a VA loan the right choice for you? Consider these pros and cons when making your decision to determine whether it's the best solution for your homebuying needs.

About the Author
Author

Michael Rothstein, GRI

Active in residential brokerage since 1985, Michael enjoys a loyal following of past buyers and sellers. Prior to entering brokerage, he studied culinary arts and managed restaurants in the Boston area. Born and raised in Newton, Michael is very familiar with the Greater Boston area. His seven-day-a-week commitment to his profession serves his clients and customers well. His educational background includes The Johnson & Wales Culinary Institute, The Lee Institute for Real Estate, and The Tom Hopkins and Floyd Wickman Sales Training courses. 

In recognition of his completion of the prescribed courses in real estate practice and ethics, Michael has earned the distinguished GRI (Graduate, Realtor Institute) designation. He continues his long-standing membership in the National Association of Realtors and is an avid fly fisherman, musician, and outdoor enthusiast. 

Michael was awarded the International President's Circle Award for sales expertise, market knowledge, and dedication to clients for 2020 and 2021. In 2022 and 2023 he was awarded the International Presidents Elite Award, representing the Top 2% of Coldwell Banker Agents Worldwide, for demonstrating exceptional sales production, ambition and his commitment to the Real Estate Industry.