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Created on Wednesday, 18 January 2012 04:00

VA Loans Have Many Arms

Like the Federal Housing Administration, the Veteran’s Administration also offers homeowners the opportunity to get home loans. The home loan offered by the Veteran Administration is geared towards helping former service men and women who have sacrificed a lot for the security of this country.

There are a lot of benefits associated with mortgages backed by the Veteran Administration which makes this form of mortgage very suitable for veterans. In most cases, veterans do not hold the much needed financial power as most other citizens in the country may possess.

These people may be suffering from battle related illnesses or injuries and may have to spend a large sum of their lifetime savings on medical care. This makes it difficult for them to meet the requirements of conventional mortgage facilities.

Due to the level of sacrifice these people have offered to the nation, it would have been great to freely offer them forgivable loans for the purchase of homes but that would make it virtually impossible to sustain the VA loan program. For this reason, veterans who acquire VA home loans are obligated by the terms of the loan to repay the loan.

However, the conditions surrounding VA loans are such that it makes it easy for the veteran, whether unemployed and relying heavily on pension or engaged in menial job, to repay the loans. Depending on the situation of the borrower, the person can decide to opt for a particular type of loan repayment plan.

The Veteran Administration has taken this stance in order to ensure that there is a huge difference between its home loans and those of the conventional loans so as to attract more veterans.

The VA home loans have one repayment plan that is just similar to the conventional mortgage. In this method, the borrower locks down a fixed rate on his or her mortgage.

This rate is the percentage of interest the lender hopes to gain from the principal amount. Once the loan has been granted, the borrower is required to pay back the loan amount plus the interest on it.

The lender makes this easy for the borrower by calculating the total interest that would be accrued on the loan amount and then dividing it by the number of months needed to repay the loan in full.

This calculation will help decide the monthly payment the borrower would be making towards repaying the loan. For every payment the borrower makes on monthly basis, the money would go into settling the principal and the interest on the mortgage. 

The Veteran Administration also offers mortgages that have fixed interest rates at the start of the loan repayment schedule. And then, as the borrower continues to make mortgage payment without default, the loan changes into an adjustable rate mortgage. This offers the borrower the opportunity to enjoy lower interest rate when mortgage rates fall.

For borrowers whose finances are not in the best of shapes but are expected to grow tremendously in the not too distant future, VA loans offer them the chance of securing a graduated payment on their mortgages.

By graduated payment, we mean that the borrower starts off the process to repay the loan by making smaller monthly payment and as the loan ages, the monthly mortgage payment required by the lender from the borrower increases. By the time the borrower is almost a few months away from settling the loan completely, his or her monthly payment would be very high.

Beneficiaries of VA loans can also opt for an adjustable rate mortgage just like in the conventional loans. Borrowers can get help from qualified housing counselors who would help them decide on the right payment plan.