Military loans are new to the scene and have been created by the government with the purpose of thanking the armed forces that have served the country. Besides the fact that veterans enjoy low military mortgage rates, they are granted access to more perks than ordinary people. These loans are available only through private lenders and are slightly different than regular loan deals in the sense that the applicant can also save some money while borrowing. In what follows the main differences between military and regular loans will be discussed.
When purchasing a house, people are usually required to make an initial down payment so as to ensure the lender that you are not a financial liability. The down payment is the way in which the financial lender covers itself in case the borrower does not keep up with the monthly payments and will also demonstrate that you are willing to pay back the mortgage. In the case of a mortgage for veterans, the applicant is not obliged to prove that he does not represent a liability due to the fact that the loan program is sponsored directly by the government who will take the risk. In addition to this, the down payment in a regular loan is usually 3% of the total sum, which can be a real impediment for some. The advantage to not making the down payment is the fact that the army personnel can keep an emergency fund owing to the fact that the loan is granted almost free of cost.
Interest rate and insurance
An ordinary mortgage implies two main types of interest rates: fixed and variable. With a fixed interest rate, you have to pay a fixed amount of cash every month without having to worry that the rate will increase in the following period. On the other hand, variable interest rates provide flexibility in the sense that the borrower is allowed to make more payments in order to repay the loan and is spared the trouble to pay rate breakage costs. Although the loans for veterans offer competitive interest rates, choosing between fixed and variable rates should be done at the advice of a broker and it is necessary search the market for the lowest rates. Moreover, lots of loan applications have been abandoned due to the fact that people could not afford to pay the insurance.
As opposed to regular home loans which only allow the borrower to purchase a house which is later on used to secure the loan, a military mortgage offers the possibility of building from scratch the house and make other little improvements in the home. The mortgage can also be added to a previous mortgage. In addition to this, the borrower must demonstrate that the new home was built according the specifications and requirements. The loan can even be transmitted to another person who can take on the financial responsibilities.
In conclusion, if you are a veteran who is looking to purchase a house you should not miss this opportunity. Regular loan deals can really put you in debt and you will be apying for the rest of your life.