Military Loans Information

Hi, I'm the Goat, a writer here at Military-Loans-Info.com.  I spent 14 years in the Air Force and got the name "Goat" because I had a penchant for making goat sounds during briefings and whatnot.  I have a few expeniences with VA Military Loans that I'd like to share.  These thoughts might be helpful to you if you're mulling over the decision to  use one.

First, I hope you're skeptical of anyone named "Goat" giving you advice on loans.  My first reaction would be, 'I'm purchasing a home here, not looking to learn about goat mating calls.'  Point taken.  Although my rural upbringing did equip me to share in all manner of 4H-like pursuits, listen to why I might be exactly the person you want to get advice from:

• Registered Investment Advisor to multi-billion dollar pension fund
• MBA (in Finance) from University of Colorado
• Degrees in Mathematics and Physics from US Air Force Academy
• Active in Real Estate Investment
• And, again...14 years active service

Our incentive to provide good advice to you is that quality unbiased and independent information will improve our traffic.  I think you will agree that this is unbiased and independent, so please spread the word to anyone looking at VA military loans to come take a gander.  Now that we've cleared the air, let's get to brass tacks.

Goat, did you use the VA Home Loan?

No.  For me, it was too expensive.  I'm a real penny-pincher when it comes to buying a home, my objective is to try to make as much money as possible down the road.  The VA Military Loan is actually more expensive in the long run, and that's why I avoided it.

You see, the 'no free lunch' addage applies to VA Military Loans just as it does to about everything else.  When I first heard of a home loan that required no down payment and had rates "the same" as conventional home loans, my thought was 'that's a no-brainer'.  This was the thought shared by virtually every other serviceman and woman that was familiary with the loan.  I distinctly recall going to a seminar at Spangdahlem AB, Germany, in which the Family Support Center finance specialist took time to describe these benefits.  I felt that I had a secret weapon going into the seminar--my degree and excellence in mathematics.  Still, it was difficult to determine if the VA Military Loan was really a good deal or not. 

VA Military Loans Advantages

On the plus side, you don't need to make a down payment.  This is huge.  Not many people have the savings to throw 35 to 60 thousand dollars into a house.  Loan underwriters these days need home buyers to put some skin in the game; otherwise, they fear you could just walk away if your home value disappears.  If you can't afford a 15% or 20% down payment, these days your options will likely be reduced to ... two.  The VA Military Loan and renting.  Renting may be a good idea right now with the housing market, but that's another story for another time.

Also, with a VA Military Loan there is no need for PMI, or mortgage insurance.  This is what you have to buy to magically turn your less than 20% down payment loan (that banks are much less likely to approve in these times anyway) into a 20% down payment loan so they can be lumped together and sold in blocks.

Those are two compelling reasons to go with VA Military Loans.  For the bad news...

VA Military Loans Disadvantages

You won't get the same rate as a regular loan--VA Military Loans' rates are higher.  The rule of thumb when I was shopping VA Military Loans 4 years ago was that the rates are 0.25% higher than their conventional equivalent.  On a $200k home that's $25 bucks a month.  To put that another way, you could afford another $5k - $6k worth of home with the lower rate, and make the same payment.  You may not think $25 bucks a month is a significant factor, but when you're talking houses, and thirty years of payments, it adds up quickly.

Another disadvantage is that VA Military Loans effectively charges you up front for your mortgage insurance.  If I can recall, the amount is based on the purchase price of the home and whether it's your first VA loan, but when I looked four years ago it would have been about $4,500 or so for a $160,000 loan.  You can check at the VA website or with your local "Family Support" specialist (no idea what other services call this function; I think the Air Force calls it something new these days, too).  It hasn't changed much over the years, and it's a staple component of the VA loan.

Athough you don't have to fork over that $4.5k at the time of purchase, you really do.  You don't pay it in cash upon closing, but it gets added to the overall amount of your mortgage.  Just because you didn't open your wallet and count out 45 C-notes, you're still giving up a lot of quan to get into this loan.  When the time comes to sell the house that will be $4.5k less you see on the sale, and $4.5k less equity banks will see when you apply for other forms of credit.

Conclusion on VA Military Loans

When I looked at actually using a VA military loan, it seemed like the price was high if you could afford a 20% down payment.  Although you didn't see it right away, the VA military loan was about $10,000 more expensive than a comparable conventional loan.  That's why I think you should avoid a VA home loan if you have the option to go with a conventional home loan.

Of course, that's the big issue, isn't it?  If we could all afford to make that down payment, we would.  That's why this product came along.  And it is a wonderful benefit.  Just because it's more expensive doesn't mean it's not properly priced.  I can't think of any other employer that can offer an employee a no-downpayment home loan.  It is a luxury when you are able to purchase a home without a big sack of cash, especially in these times.  Just be aware that it is an expensive route to owning a home.  Good luck finding the right home and the right financing; be it military loans or conventional.