What Should One Choose Between VA Loans And PMI?

Homebuyers have been looking for ways to buy their dream home in an easy way and mortgage protection insurance tops the list for the same. In this article, you will see a fair comparison of VA loans and private mortgage insurance to decide the best for you.

Unlike other home loans that have less than 20% equity, you don’t need to buy a mortgage insurance to safeguard the risk of default. This is because the U.S. Department of Veterans Affairs guarantees their homes loans and promises to absorb the risks of default that are very rare to come. Most of the time, the borrower doesn’t need to buy an insurance plan to get a home loan.

VA doesn’t have the privilege of asking for a mortgage plan or a down payment for the same. Hence, it adjusts the cost of insuring with the funding fees that new borrowers have to pay at the time of closing. Usually, the borrower needs to pay one-time payment that is equal to 2.5 percent of the loan balance. This amount may vary depending on various factors such as the credit score of the borrower and the loan-to-value ratio of the property. Below, we are mentioning some important facts you need to know about funding fees.

Here, it’s notable that the funding fees are calculated based on the VA loan transactions for the borrowers who have made a down payment ranging from 0 to 5%.

Some of the VA borrowers may not need to pay a funding fee. You can be exempted from paying the funding fee if you are a veteran with service-related disability and receiving a compensation for the same. If you have a service-related disability and haven’t received retirement or active duty pay and receive a compensation. For the veterans, who died while serving the nation or from a service-related disability, their surviving spouses also can get an exemption from the same.

• VA Loan vs. PMI
  

VA loans come as a big advantage to servicemen as they don’t need to pay any down payment for the same. This proves to be a big advantage as people need to invest a large portion of their savings as the down payment. Many buyers can’t get the desired home just because they don’t have enough savings to make the down payment. The VA loans have showed up as a boon for those homebuyers and have been greatly helping them to get their dream home easily. However, they have to pay the funding fee, but many buyers get an exemption from the same depending on the flexibilities provided to servicemen and their spouse.

Private mortgage insurance, better known as PMI has been helping prospective homebuyers for long. Under these plans, the buyers need to make a fixed premium every month and the insurance provider provides mortgage life cover for the home loan. In case, you fall ill, meet an accident or discontinue your job for some reason, your insurance provider will make the mortgage payments on your behalf.

Whether you are interested in VA loans or prefer mortgage insurance, you can always get a suitable plan from top providers in the country. You can fill and a simple online form on the official websites of providers and various insurance representatives will reach you the best get mortgage life insurance quotes for you. The insurance representatives will explain each plan clearly and answer your queries about the same. Depending on the benefits and coverage offered, you can easily choose a plan that suits you the most.