You’re about to hear some crazy advice: If you’re a young, college veteran, then you should take our a mortgage. This isn’t typical college student advice, but then again, young veterans aren’t typical college students. If you’re a VA-eligible borrower under 26, then you might want to consider this, regardless of factors like marriage. Find out why you should buy a home, why you should use a VA loan, and which VA loan option is best for you.
Why You Should Buy a Home
At your age and situation, you probably haven’t started thinking much yet about retirement, or investing money for the future. The thing is, now is the best time to be thinking about those things, because you have so much time to build up massive retirement accounts by the time retirement arrives. So many people don’t start thinking about retirement until it’s only 10 years or 15 years away, and 10-15 years is not very long in investing years. If you’re 25, you have 40 years until retirement, which gives you an awesome amount of time to get your retirement in order. One of the first, easiest, and smartest ways to get started saving for retirement is to buy a house instead of renting. While you’re in college, you’re hopefully using the GI bill, which includes a housing stipend, which is perfect for helping you afford a house instead of renting. Don’t look for a massive house; rather, look for a small house that’s reasonably priced, and spend some time fixing it up over the few years that you own it, which will increase it’s value above the natural market increase over time. Buying a home allows you to save money by putting it into your home instead of throwing it away on rent, and counts as an investment since you’ll be selling it at some point.
Why You Should Use a VA Loan To Do So
Compared to conventional loans, VA loans get you lower interest rates, easier qualification standards, and better loan options (which we’ll talk more about in the next paragraph). Unless you’re super-responsible with money, you probably don’t have nearly enough saved up for a down payment on even a small house, and that’s OK. With the VA loan program, you don’t have to make a down payment if you don’t want to. If you do decide to make a down payment, you can expect even lower interest rates and better offers from lenders than you already get by using a VA loan. VA loans don’t require mortgage insurance even if you don’t make any down payment at all, which makes them a better option than FHA loans. Especially when you’re buying a smaller house, you can do a VA loan with very little money down, since you can take out not only the down payment but also the VA Funding Fee, which can be rolled into the loan amount, leaving only the lender’s 1% origination fee and maybe another 1% in other fees such as the appraisal.
If you can, you should stay away from the 30-year fixed. You are simply not going to be in this first home long enough to accrue any useful amount of equity if you buy with a 30-year fixed and make the minimum payment. If you start with a 15-year fixed, you’ll be building equity much faster and paying a ton less interest. Even better, since you probably aren’t going to be staying in the home for longer than 5 years anyway, you may want to go with the VA hybrid ARM, and get a really low starting rate that’s fixed for the first 3-5 years, and then adjusts by no more than 1% annually. Starting rates on the VA hybrid ARM are usually even lower (often significantly) than starting rates on 15-year fixed loans, which are in turn lower than interest rates on 30-year fixed loans. So, in summary, you should look first at the VA hybrid ARM, and if you don’t like what you see, you should go to the 15-year fixed. If you go with a 30-year fixed, you’ll throw most of your money each month away on interest and your “investment” will not be nearly as valuable nor grow nearly as quickly.
If you want to learn more about why it’s a smart decision for a young college veteran to get a VA loan, contact us today!