There’s No Mortgage Insurance on VA Loans in Washington State

November 2, 2022
Last updated:
November 2, 2022
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The state of Washington has a fairly large military population. As a result, there are many residents who could benefit from using a VA loan to buy a house.

We’ve written about the benefits of VA loans in the past. Today, we’ll focus on one benefit in particular, which has to do with mortgage insurance.

Here’s the short version:

Home buyers in Washington State who use a VA loan can purchase a house with no money down, while avoiding mortgage insurance at the same time. Typically, a low down payment will require the borrower to pay mortgage insurance. But that’s not the case with VA loans. It’s one of the many benefits offered by this program.

Mortgage Insurance Explained

Many home buyers in Washington have to pay for private mortgage insurance (PMI) when they take out a loan. This type of insurance is usually required when an individual home loan accounts for more than 80% of the property value.

For example, if you were to put down 5% on a home purchase and borrowed the remaining 95%, you would likely have to pay mortgage insurance. This is just an industry-wide requirement that has been in place for many years.

The advantage of mortgage insurance is that it allows home buyers to purchase a house with less money down. The downside is that it could increase your monthly payments by several hundred dollars per month, depending on the size of the loan.

This is why some home buyers across Washington State choose to put down 20% or more on a home purchase. They do it to avoid the extra cost brought on by mortgage insurance, which reduces the size of the monthly payments.

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VA Loans Do Not Require It

But the rules are different when it comes to the VA home loan program. Borrowers who use a VA loan to purchase a house in Washington can put little or no money down without having to pay mortgage insurance. This is true even if you finance up to 100% of the purchase price.

In an article entitled “Ten things most Veterans don’t know about VA home loans,” the U.S. Department of Veterans Affairs stated the following:

“With a VA loan, you also avoid steep mortgage insurance fees. At 5 percent down, private mortgage insurance (PMI) costs $150 per month on a $250,000 home, according to PMI provider MGIC.”

By sidestepping PMI, home buyers who use a VA loan could reduce their mortgage payments by more than $100 per month. That’s on a modestly priced home. If you buy a more expensive property (and use a bigger loan), you would save even more on your monthly payments.

With the cost of living going up all the time, home buyers often seek ways to minimize their monthly mortgage payments. The VA program could help you achieve that goal by taking PMI out of the picture.

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Other Benefits of the Program

We’ve covered two of the biggest benefits offered by VA loans. Washington home buyers who use this program can finance up to 100% of the purchase price without having to pay for mortgage insurance. That’s a unique combination of benefits you just won’t find with most other loan programs.

But the benefits don’t end there. VA loans are also one of the easiest mortgage products to qualify for, when it comes to credit scores and other borrower criteria. That’s because of the unique nature of this program.

The federal government guarantees VA loans, giving mortgage lenders a layer of protection in cases of borrower default (or inability to repay). Because of this, the minimum qualification criteria for VA loans in Washington State tend to be more relaxed when compared to conventional or “regular” mortgage loans.

Additionally, borrowers who use this program can do so more than once. If you use a VA loan to buy a house, and later sell the home and pay off the debt, you could restore your program eligibility and use it on a future purchase.

In future articles, we will explore some of the other benefits offered by the VA home loan program. Today, we wanted to focus on the mortgage insurance subject in particular. The bottom line here is that this is one of the only financing options that allows you to put little or no money down without mortgage insurance being added on.

Questions? Sammamish Mortgage serves the entire state of Washington and offers a broad range of home loan options, including VA. Our knowledgeable experts can answer any questions you have about using a VA loan to buy a house in Washington. So don’t hesitate to reach out!

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