Saving money on a mortgage is important. Every home buyer wants to get the right mortgage at the right price. There are several expenses that come along with buying a home and the right mortgage can help keep it more affordable.
As a veteran, you’re entitled to the benefits the come along with a VA home loan. You get to save money by taking out a VA loan for your mortgage, which can make it much more affordable to own a home. Even with the built-in savings, there are certain things you can do to save even more money on your home purchase with a VA home loan.
VA Home Loan – Discount Your Rate with Points
You may think you cannot get a lower interest rate on your mortgage because VA loans come with the lowest rates possible. However, if you pay discount points, you can get an even lower rate. Discount points are an additional fee you will pay to the lender at the time of closing. The fee allows the lender to lower the interest rate, which will save you money throughout the course of the loan.
In addition, discount points are tax-deductible. They are optional and you don’t have to pay them, but if you have the cash on hand, paying a discount point can save you a large amount of cash over the course of your mortgage.
VA Home Loan – Choose Your Down Payment
You have a few options to save money on your VA home loan when it comes to the down payment. You can choose to pay a larger down payment to save money by lowering your monthly payments. If you cannot pay a large down payment, you can also choose to pay no down payment at all.
Maybe the upfront costs are the problem and you cannot afford to buy a home because of the upfront money down. If this is the problem, choose to put no money down. However, if the down payment isn’t an issue, choosing to put more money down will lower your monthly payment and save you money on the interest over the course of the loan.
VA Home Loan – Finance the Funding Fee
You will pay a flat fee at closing known as a VA funding fee. This can range in amount depending on how much you pay for the down payment. It will also depend on how many times you’ve used the VA home loan program and which program you are using.
Regardless, the VA funding fee can be financed. This option comes up at closing and you can have it rolled into your mortgage. If you choose this option, it will increase your monthly payment, but you won’t have to pay as much up front to get into a new home.
VA Home Loan – Pay Extra
Even one extra mortgage payment per year can make a big difference over the course of your VA home loan. You can pay extra whenever you want and the extra payments will help to reduce future monthly payments and the interest you pay on your loan. Make sure you check with your lender to ensure you won’t deal with any penalties for paying extra, however.
VA Home Loan – Let the Seller Cover Closing Costs
Having the seller cover the closing cost for your home is rather common with VA home loans. It will likely be one of the concessions you agree upon when you agree to buy the home. This allows you to come up with less up front and get into a home without so much money out of pocket.
While the seller cannot cover every closing cost, they can cover the VA funding fee, discount points and tax prepayments. You can also agree to have the seller leave appliances behind, such as a refrigerator, dishwasher and stove.
Total concessions are not allowed with a VA home loan. However, your concessions can go up to 4% of the total home value. This means, if you buy a home worth $200K, you can go up to $8,000 in concessions.
There are several ways to save money on your VA home loan. Make sure you take advantage of these tips so that you can get the best deal possible.