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Posts Tagged ‘100% financing’

Top 5 reasons my past VA loan clients have enjoyed a VA loan

Saturday, January 23rd, 2010

Here is one loan officer’s Top 5 list of reasons why veterans enjoy the VA loan.

 

  1. I have helped hundreds of veterans either refinance or purchase homes using their eligibility. I think the main attraction to my clients is low interest rates. Government insured loans on average our more competitively priced than conventional. In the last year we have seen rates as low as 4.25% fixed. 
  2.  No mortgage insurance, unless you have a loan that is under 80% of the appraised value, you will pay PMI (premium mortgage insurance). this is not the case on a VA insured loan, VA homeowners do NOT pay PMI no matter what your loan to value is. 
  3.  The ability to do a streamline refinance on a VA loan is a great sense of security, knowing you can refinance if rates drop without income qualifying and even more important no appraisal, this means if home values drop in your area you can take advantage of current market rates.
  4. 100 percent financing, With today’s struggling economy and banks tightening their lending criteria it is nice to know you can experience the American dream of owning a home with no money down.
  5. Another great component of the VA loan is the fact it’s an assumable loan, this can be great help when selling your house.

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How Much Money Should I Plan on Putting Down When Buying a New Home via a VA Loan?

Tuesday, October 27th, 2009

One of the first things a home buyer thinks of or plans on when preparing to purchase a home is, how much money will need to be put down to buy the home.  From about 2003-2006, no money down loans were a dime a dozen and very few home buyers were putting money down even if they had substantial money saved up.  Well after the mortgage meltdown of 2007-2008, the 100% financing or no-money-down loans are a thing of the past; for most home buyers.

Veterans and those using a VA home loan for the purchase of their house, still do not have to put any money down when purchasing or buying a home whether getting a Texas VA loan, Florida VA loan, or any other VA loan type.  Just because veterans are not required to have money to put down and are able to borrow the full sales price of the home, doesn’t mean it is always in the veteran’s best interest.  There are reasons to consider for making a down payment on a VA loan.

VA loans do not require mortgage insurance (PMI) and this is the main reason people would be interested in putting money down on a home purchase; by putting money down you can in many cases avoid paying mortgage insurance.  So if VA loans do not require the payment of a monthly mortgage insurance, then why would a veteran want to put money down?  Below is a list of some reason or options to consider for making a down payment on a VA loan.

Reasons to consider for making a down payment on a VA loan or VA home purchase:

Make your monthly payments on your mortgage smaller.  (budgeting) By putting money down a veteran is able to control more of the monthly mortgage payment that will be due each month.  Suppose you are buying a home for $250,000 and your rate is 6.5%.  Your monthly payment if you did not put any money down would be $1580.00 (PI only).  Putting down 20% or $50,000 would lower your monthly PI to $1264 and save you $316 a month.  These examples do not take into account your VA funding fee.
Pay a lower % on your VA funding fee. (lower your closing costs) The amount of money a veteran puts down on a VA purchase, will affect the amount of the VA funding fee charged by the department of veterans affairs and also has an impact on the monthly payments for the VA loan.  To fully understand how your VA funding fee will affect your VA loan please click here.  Just like a down payment will lower your monthly payment purely mathematically, a VA funding fee will also affect the final loan amount and thus have an impact on your overall monthly payment.
Emotional satisfaction of having some instant equity in your home. When a veteran doesn’t put any money down on the purchase of a home, the veteran will not have any equity in the house.  Knowing you have skin in the game and that you owe less on your home than what it is worth goes a long way in making you feel good, responsible and you also have given yourself more peace of mind.
Possible lower interest rate. Though most lenders or mortgage companies that work with veterans and do VA loans will not give lower rates or incentives for veterans that put money down, it has happened in the mortgage industry that a lender may be more willing to give a lower rate to a veteran that has shown responsibility in saving money and putting it down on the home.

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Posted in VA Loan, VA Purchase, va funding fee | 1 Comment »

VA Loans vs. Conventional Loans – Which is better?

Friday, May 1st, 2009

What should you choose?  VA or Conventional?

At some point Veterans will come to a dilemma when deciding what type of loan to use when buying a home.  This is a very valid question or concern as both have their place in the home buying process.  Having worked with Veterans for the past 7 years I can shed some light on this subject.  First let me start by saying that owning your own home is still one of the best financial decisions an individual can make if its done right.  What I mean by that is simply don’t bite off more than you can chew.  Once you sign on that dotted line you are now responsible for making payments for the next 15 to 30 yrs.  BE SMART ABOUT IT.  OK, lets analyze the VA loan and Conventional loan.

VA loans allow NO MONEY DOWN 100% financing

VA loans  allow for a Veteran to borrow 100% of the purchase price.  This now is one of the only loan programs that allow for 100% financing.  Unlike Conventional loans, you don’t have to pay any mortgage insurance premium (MIP) on Veteran Home Loans.  MIP is a separate insurance that covers the lender in case of loan default.  The amount of MIP is paid on a monthly basis and is completely risk based and can be very expensive.  The reason why a Veteran does not have to pay this is simple.  The Department of Veteran Affairs is guaranteeing a portion of the loan to the lender.  This is what is commonly known as your VA entitlement.  For the Dept of Veteran Affairs to guarantee a VA loan to the lender there is a fee assessed by the VA.  This is called a VA Funding Fee (VAFF).  The amount of this fee is usually 2.15% of the loan amount and it CAN BE financed into the loan.  This fee can be decreased if the Veteran puts money down and will also be waived is the Veteran is receiving 10% or more VA disability.  In this day and age, who has $20,000 just laying around to put down on home.  This is just my opinion, but if you have that much money saved its better left in an interest bearing account.  Besides, all the interest on home loans is tax deductible so on that $20k you will will gain interest and be able to deduct more interest on your home.

Do I need to have great credit?

Credit Qualifications on VA loans are much different than conventional loans.  With VA loans its based on timely payments within the last 12 months whereas Conventional loans are score driven.  A Veteran who has a credit score of 620 can get them same rate as someone with an 800 credit score.

How much money do I have to make?

There is an additional step with VA loans.  VA is not so concerned about Debt to Income (DTI) but rather Residual Income (RI).  The Department of Veteran Affairs has established a calculation based on family size, loan size and location and takes into account net income (after taxes).  Conventional calculates DTI on gross income (before taxes).

These are the main differences between VA loans and Conventional Loans.  If a Veteran has served his country and helped the cause of Freedom and is given the ability to use a VA loan, there is no reason why he/she should not use it.  I’ve done both VA and Conventional loans.  VA LOANS provide lower monthly payments.  This industry is changing so much. It isn’t what it used to be but the VA loan has remained constant.  Good luck and happy house hunting.

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Posted in VA Loan, VA Purchase | 1 Comment »