Military Veterans: Take Advantage of Your VA Loan Benefits

George Lopez |

House in hands

Seek out mortgage lenders who charge low fees

As property values continue to rise and interest rates remain near historic lows, many Veterans are looking to refinance their VA Loans. However, many of these Veterans are finding that a good portion of their VA benefit is being wasted on lender fees that are being tacked on to their mortgage loan by greedy mortgage lenders. Memo to our nation’s finest — beware of high lender fees!

When President Roosevelt signed the Servicemen’s Readjustment Act in 1944 to provide the benefit of homeownership to our Veterans, the intent of the VA Loan program was fairly simple: to provide soldiers returning home from World War II with low cost mortgage financing, including a zero down payment option for a home purchase, as well as a number of attractive refinancing options. Not surprisingly, more than 20 million Veterans have since taken advantage of the VA Loan program.

Nowadays, the benefits of obtaining a VA Loan are greater than ever, especially when compared to Conventional Mortgages. In addition to the attractive zero down payment feature, interest rates for VA Loans are currently about .50% lower than Conventional Loans, which could save you an average of $3,100 per year on a $250,000 mortgage.

However, as we have seen recently, not all VA Loans are created equal. The VA Loan program appears to be susceptible to an all too common trend in the mortgage business — high lender fees. A disturbing number of mortgage lenders have become more aggressive in their marketing of VA Loans, wrapping themselves in the flag and touting their patriotism. The closing costs that these VA lenders charge can vary significantly and Veterans would be well advised to shop around before deciding which lender to use.

As you may have guessed, high lender fees are not exactly a good thing. In most cases, the lender will finance (or add) these high fees into your loan amount which can take years pay back. The net effect of this practice will be to reduce the amount of your VA benefit that you’re actually using. In other words, if you want to get the most out of your VA Loan eligibility, choose the lender who charges the least amount of closing costs. If you’re buying a home, you’ll be eligible for more house, and if you’re refinancing to make home improvements or consolidate some debts, you’ll be eligible for more cash out.

If you’re a military Veteran, the bottom line is this — work with a mortgage lender who charges low lender fees, or perhaps best of all, no lender fees. Chances are that you’ll enjoy a lower monthly mortgage payment and be in a better home equity position than if you shelled out thousands of dollars in lender fees. Remember, the original intent of the VA Loan program was to reward our military Veterans for their service and not to provide the means for a greedy mortgage lender to pad their profits.

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