When Shouldn't You Get A VA Loan? Three Potential Reasons To Go Conventional Or Cash

Posted on: 3 February 2017

VA loans are an excellent way to get service members into a house that they otherwise couldn't qualify for. But what if you could apply for either a conventional loan or a VA loan? VA loans convey many benefits, but that doesn't mean they're always a good solution. Here are a few situations in which it may actually be beneficial to choose a conventional loan -- or even pay in cash.

When You're In a Fast-Paced and Competitive Market

Unfortunately, there are many sellers out there that don't want to work with the VA. They may have misconceptions about the VA program or they may simply not want to wait: VA loans have a reputation of being harder and more time consuming to close. Many sellers also (likely falsely) believe that VA loans have a higher chance of falling through because military members may leave quickly. Either way, VA loans aren't generally considered to be as desirable as conventional loans.

When You're Thinking About Moving

With that in mind, you also shouldn't consider purchasing with a VA loan if you're considering moving any time soon. VA loans are only for primary residences; they aren't for second homes or for investment properties. If you're thinking about renting out your home in the near future, a VA loan isn't going to be appropriate for you. If you already have a home, it's also not going to be appropriate. Failure to live in the residence for at least a few years could result in the loan itself being recalled.

When You're Able to Comfortably Pay In Cash

Most people want to finance anything they can, as long as they can. But if you're downsizing a home, it's possible you've built enough equity to purchase your next home in cash -- and there's a fairly compelling reason why you might want to do this. Not only does it entice sellers (and therefore make it easier to negotiate a home down to a lower price), but VA loans come with a VA funding fee which is absolutely non-negotiable. If you're purchasing a $200,000 home with a VA loan, you'll probably be looking at around $4,000 in VA fees. On the other hand, if you're purchasing a $200,000 home in cash, you may be able to negotiate down to $195,000. 

For most situations, a VA loan is extremely beneficial. It lets you purchase a home with 0% down and with a very low credit score. But even though it can be beneficial, you may still want to explore other loan products before making the choice that feels best for you. Visit websites like http://www.republicstatemortgage.com to learn more.