Top 5 Mortgage Myths
Buying a new home is an exciting venture and a huge step in a person’s life. As a qualified veteran of the United States, you are eligible for a VA Loan which makes it easier and more affordable than ever to buy a new house. With no required down payment, no monthly insurance and lower interest rates, the VA Loans make it possible for millions of veterans and their families to become first time homeowners. As with conventional loans, it’s important to know everything you can about the VA Loan guaranty program. This article is here to help dispel some of the myths.
Myth 1: The VA issues the money
The VA does not actually issue the money itself; instead, veterans receive the money from private lenders such as mortgage companies, savings & loans and banks. The loan issued to the veteran is guaranteed by the VA up to a certain amount. Basically, the VA insures the policy, making it secure for the private lender to issue the money.
Myth 2: The loan is a gift
The VA Loan you receive is not a gift. Just as with any conventional loan, you are required to pay back all the borrowed money to the private lender. That being said, the VA will sometimes step in and help a veteran if they are having trouble making mortgage payments.
Myth 3: A Certificate of Eligibility guarantees I will receive a loan
While you do have to establish your eligibility in order to receive a VA Loan, it does not necessarily mean you will be approved for a loan. You will still need to provide financial documents to your private lender in order to establish your qualifications based on a credit check, financial stability and debt-to-income ratio.
Myth 4: The best way to shop for mortgages is to look at the interest rate and points
While interest rates should be a factor, it’s important to look at the Annual Percent Rate (APR) in order to gauge the overall costs. If the APR is much higher than the interest rate, there may be some hidden costs involved. It’s also important to keep in mind your closing costs, as those can add up quickly.
Myth 5: The best type of loan is a zero-point loan
Everyone’s financial situation is different and should be taken into consideration when deciding on the right loan. While a zero-point loan might be great for some, in other cases it might be best to go with a lower interest rate that has points. It’s important to discuss it with your lender to see what the perfect fit is for you.
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