Nobody out there has a crystal ball as to what will happen with the housing market, specifically, how long these low-interest-rate veteran’s mortgage loans will continue. But there are many industry experts and we are hearing some consensus that bodes well for homeowners: low interest will continue through 2014 and possibly beyond.
The Mortgage Bankers Association (MBA), the national organization representing the real estate finance industry, predicts that by the end of 2013, the interest rate on a 30-year fixed mortgage will be at 4.4 percent or lower, increasing to 4.6% by the end of 2014.
This is particularly good news for veterans and reservists who have not used their VA home loan entitlement and who are working to set their financial house in order so they can get into their own home. There are many reasons you may not have acted on getting into your own VA home loan as yet—low credit score, strengthening your savings accounts, sorting through past financial problems, etc. The time is now right for you to press ahead until you can qualify for your VA home loan.
Why Now is a Good Time to Get a VA Loan
These historic lows in interest rates seem to be stuck in place for a while, but we all know they can’t last forever. The prudent thing would be to outline a plan for qualifying for a loan right now and begin your preparations so you can get into the home before interest rates rise.
For some perspective on interest rates: financing hundreds of thousands of dollars over 30 years means paying a lot of interestss. For instance, on a $400,000 fixed-rate VA mortgage loan, a mere two-tenths of a percent (the difference between an interest rate of 4.0 and 4.2 percent, for example) costs you an extra $16,400 over the life of the loan.
In December 2012, the Federal Reserve established specific targets for when it will raise interest rates. It said it won’t raise interest rates “as long as inflation isn’t forecast to rise more than 2.5% in the future and as long as unemployment remains above 6.5%.”
These two things are not likely to happen before 2015, at least. Who says so? Well, the Fed and the world’s top economists have published independent reports projecting inflation below 2.5% and unemployment above 6.5% through 2014.
Plan Now to Get Your Veteran’s Home Loan
Here are 5 things you can do today to prepare to get into your home while the VA mortgage interest rates are low:
- Get a free copy of your credit score so you know your number and you know where you need that number to be. Most conventional lenders require a credit score of 700 or higher to qualify for a home loan. Lowvarates.com has helped hundreds of homeowners get into homes with credit scores of 630 and even lower in some cases.
- If you have had financial setbacks and your credit score has suffered because of them, start correcting things now. Contact creditors and arrange to fulfill your debt obligations. There are a number of debt consolidation companies that can help you negotiate debt amounts and payoffs until you get back on track. Look for a company that provides a free service (rather than a company that requires a large up-front fee).
- Establish simple credit accounts—things like a gas card or a bank card—charge a modest amount to them and pay it all off immediately. Do NOT purchase things you don’t need and for which you can’t pay. Remember, the point of this is to strengthen your credit score by showing you pay your debts on time and completely.
- Research the housing market in the area you would like to live. With very little work, you can find out the price ranges in an area and what homes are going for (do it online). You might even be able to find government-owned properties that you can purchase at a reduced price. Visit the federal housing website, www.hud.gov, for listings. Talk to a local realtor for details on HUD homes.
- Establish savings. A great benefit of your VA entitlement is that you can get a VA home loan without a down payment. However, any homeowner can tell you that moving into a new home always has hidden costs. There is always something to fix or to improve. Having a savings account that you have ear-marked for your home will take the pressure off of your regular finances.