cut costs with a va home loan

Ways to Cut Costs with a VA Home Loan

If you’re a coupon-clipping, discount hunting shopper, you probably know the cheapest way to purchase anything. But, did you know there are also ways cut costs when purchasing a home with a VA loan? Here are 3 ways to cut costs with a VA home loan.

Ways to Cut Costs with a VA Home Loan

Ask the seller to pay closing costs

VA loan closing costs typically range from 3-4 percent of the total loan amount. This means as a military buyer you could be asked to pay $5,000-$10,000 out of your own pocket on closing day. But, did you know a majority of VA home buyers don’t pay anything out of pocket on closing day? Asking the seller to pay closing costs is a common negotiation for VA loans, and it’s often granted, especially in a buyer’s market.

Lift credit score

Working on your credit score is one of the best ways to cut costs with a VA home loan. A borrower with a low credit score represents more risk for lenders, and therefore the lenders will make those borrowers pay a higher interest rate. Borrowers in the 700s can sometimes lock in rates 1-1.5 percentage points below the sub prime rate. Just the difference between a 3.2% interest rate and a 4.7% interest rate is a savings of almost $200 a month, and over $60,000 saved over the life of the loan.

Build equity

By building equity in your home, you reduce the amount in interest you’ll have to pay, and you don’t have to pay your mortgage off in one big lump sum. Here are a couple common ways you can lower your mortgage debt:

  • Make one extra payment a year. So you recently got a bonus at work and you’re wondering how to spend the extra funds. Consider putting it towards your home loan. Extra payments can go directly to principal, which builds equity immediately. Doing so can help you pay off your loan 5 years early and save you over $21,000 over the life of a 30 year $200,000 loan.
  • Round up your monthly payment. If your monthly payment is $1,870, try rounding up to $2,000. This will also help you pay off your loan sooner and save you interest.
  • Shorter loans typically feature lower interest rates. If your income increases and the rates stay favorable, you might want to refinance for a shorter loan a couple of years after your purchase.

You may also like: 3 Common VA Home Loan Hurdles and How to Overcome Them

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