Military Streamline Loan Information
Most VA loans are eligible for all of the same types of programs that conventional and FHA loans are and that includes buydowns. A VA loan buydown works the same way as conventional buydowns but they are temporary in nature and are designed to help homeowners with a VA home loan qualify for a home mortgage loan easier. VA loan buydowns works for both the seller and the buyer and they are truly are a good way to get your foot in the door to buy a house.
How do VA loan buydowns work?
All buydowns work on the same basic principle including VA loan buydowns. The buyer or seller pays extra points or discount points when they close the loan. These points reduce the interest rate on the loan and VA loan buydowns make it easier for veteran to qualify for the loan as well as allows you to have more money to spend on a better home.
What type of VA loan buydowns are there?
Buydown loans traditionally come in two types: permanent and temporary. A permanent buydown allows you to get a lower interest over the life of the loan by paying for extra points during the closing of the loan. Buyers and sellers can both pay on the points for the permanent buydown and they are commonly used as an incentive to finalize the sale of their home. Sellers will offer to pay the extra points during a slow selling market in order to get rid of their home. It helps the buyer qualify for the loan and it helps keep the seller from having to reduce the asking price too much. Permanent buydowns are not offered as a type of VA loan buydowns.
However, temporary buydowns are offered as a type of VA loan buydowns. They work by allowing the buyer to prepay interest in order to get a lower interest rate during the first few years of the mortgage loan. Temporary VA loan buydowns are beneficial to veterans and their families who do not have a lot of money to pay for a new home buy who anticipate an increase in salary over the next two years. VA loan buydowns are also handy for first-time home buyers to free up extra cash to be able to furnish their home.
Three options for VA loan buydowns
Since VA loan buydown’s are temporary they primarily affect the buyer, although they can be paid for by either the buyer or the seller. VA loan buydowns are available on purchases only. They can be 1% below the loan rate for the first year only. They can be a 2-1 buydown which means that the mortgage payment is calculated at 2 percent and 1 percent below the loan rate for the first two years respectively. Finally a 3-2-1 VA loan buydown means that the buyer pays 3 percent, 2 percent and 1 percent below the loan rate for the first three years.
VA loan buydowns are a great way to get a nice house at a reasonable price without killing yourself month after month. It gives you some breathing space and VA loan buydowns let first time homeowners get settled into the mortgage routine.
