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VA Loan / Veteran Mortgage News
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service members avoid or break the debt cycle. Pioneer serves active-duty and career-retired military service members,
as well as Department of Defense employees.
FEBRUARY 2005
The Oscar for the Best Loan Goes to the VA Loan
Veterans and active duty military Personnel always hear about their VA eligibility for financing a
home loan as authorized by Congress, yet do they really know if this is the best type of loan out
there? We at VALoans.com decided to put the VA loan program to the test. There are many different loan
products available to Veterans, yet we narrowed it down to the most popular three, ranging from $0 down
to 3% down. The loan types are as follows:
- 30 Year 97% Loan to Value Conventional Fixed Rate Loan
- 30 Year FHA First Time Homebuyer Fixed Rate Loan
- 30 Year VA Fixed Rate Loan
Below you will find a chart which breaks out the estimated closing costs for each loan type. The information presented
below is based on a $125,000 home purchase price as of February 24, 2005, with the subject property being located in
the State of Texas and the appropriate costs being applied to the borrower.
| |
CONV. 97% FIXED |
FHA
FIRST TIME |
VA |
| Loan Amount after Down Payment |
$121,250.00 |
$123,068.75 |
$125,000.00 |
| Fees: Appraisal Fee |
$310.00 |
$375.00 |
$300.00 |
| Fees: Credit Report |
$20.00 |
$20.00 |
$20.00 |
| Fees: Processing Fee |
$425.00 |
$0.00 |
$0.00 |
| Fees: Underwriting |
$485.00 |
$0.00 |
$0.00 |
| Fees: VA Funding Fee |
$0.00 |
$0.00 |
$2,687.50 |
| Fees: Tax Service Fees |
$85.00 |
$0.00 |
$0.00 |
| Fees: Flood Certificate |
$19.50 |
$19.50 |
$19.50 |
| Fees: Closing Fee |
$150.00 |
$100.00 |
$0.00 |
| Fees: Per Diem Interest |
$284.18 |
$154.00 |
$154.08 |
| Loan: FHA/MIP Premium |
$0.00 |
$1,818.75 |
$0.00 |
| Loan: Hazard Ins. |
$1,005.00 |
$1,005.00 |
$1,005.00 |
| Reserves: Hazard Ins. |
$251.25 |
$251.25 |
$251.25 |
| Reserves: Mortgage Ins. |
$188.88 |
$101.04 |
$0.00 |
| Reserves: All Tax |
$1,070.05 |
$1,070.05 |
$1,070.05 |
| Reserves: Aggregate Amt. |
$(529.06) |
$(529.06) |
$(428.02) |
| Reserves: Tax Pro-Ration |
$(584.32) |
$(584.32) |
$(584.32) |
| Title: Abstract, Title Search |
$150.00 |
$150.00 |
$150.00 |
| Title: Closing or Escrow Fee |
$150.00 |
$0.00 |
$100.00 |
| Title: Title Exam Fee |
$200.00 |
$200.00 |
$200.00 |
| Title: Ins. Binder Fee |
$35.00 |
$35.00 |
$35.00 |
| Title: Buyers Attorney Fee |
$250.00 |
$250.00 |
$250.00 |
| Title: Lenders Title Ins. |
$100.00 |
$100.00 |
$100.00 |
| Title: Title Ins. |
$350.00 |
$350.00 |
$350.00 |
| Gov't Fees: Recording |
$50.00 |
$50.00 |
$50.00 |
| Gov't: City Tax Stamps |
$113.25 |
$113.25 |
$113.25 |
| Gov't: State Tax Stamps |
$250.00 |
$250.00 |
$250.00 |
| Add'l: Survey |
$375.00 |
$375.00 |
$375.00 |
| Add'l: Pest Inspection |
$0.00 |
$75.00 |
$0.00 |
| Total Est. Closing Costs |
$5,203.73 |
$5,749.46 |
$6,493.29 |
| Downpayment |
$3,750.00 |
$2,812.50 |
$0.00 |
| Total Needed at Closing |
$8,953.73 |
$8,561.96 |
$6,493.29 |
| Interest Rate |
5.625% |
5.710% |
5.625% |
| Principal & Interest |
$697.98 |
$715.07 |
$719.57 |
| Mortgage Insurance |
$90.94 |
$50.52 |
$0.00 |
| Real Estate Taxes |
$214.01 |
$214.01 |
$214.01 |
| Hazard Insurance |
$83.75 |
$83.75 |
$83.75 |
| Monthly House Payments |
$1,086.68 |
$1,063.35 |
$1,017.33 |
The results of our analysis clearly show that the VA loan requires the least amount of downpayment ($0) and has the lowest monthly payment. Different lenders may have fluctuating closing costs, yet they cannot change the parameters of the programs examined and their results will show that the VA loan is the clear winner in this comparison. The key factor that allowed the VA loan to have the lowest payment was that both the Conventional Loan and FHA Loan require Monthly Mortgage Insurance. The VA loan does not. We want Veteran borrowers to be aware of these facts and to be informed when purchasing a new home. Each Veteran has different personal situations and they should compare each program available to them and the costs associated with each loan type.
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Is Now the Time to Buy?
Rapid increases in home prices have some folks worried about whether they've gone too high now, and if they could
soften in the future. Generally the best way to deal with these concerns is by looking at your specific situation.
It's important to focus on the one house you'll be purchasing, rather than trying to figure out the future of the
entire real estate marketplace. While house values have risen rapidly in some places in recent years, many other
neighborhoods have experienced slower, steady appreciation.
If the home you want to buy looks like a good deal to you now, then you can feel comfortable moving forward with
a purchase. Chances are the people you'll buy from also were worried about whether they were overpaying when they
first purchased the home! Here are some questions to consider when looking at homes:
- Is this house fairly priced? See what similar homes in the neighborhood have sold for recently, while also reviewing how prices have changed over time. And make sure the house is in good shape by obtaining professional inspections to look for structural problems and pests.
- How long will I probably want to live here? Someone who plans to sell soon could be disappointed if price appreciation slows down in the near term. The longer you hold a piece of real estate, the more likely you are to sell it profitably.
- Can I afford the mortgage payments, both now and in the future? Go over how your mortgage payment could adjust later on, as well as how it fits into your budget now. Factor in expected changes to your income and expenses while you'll be living in the home, as well.
We'll help you find out if a specific home purchase is a positive move for you. Once we've determined that a transaction is doable and in your best interests, you can put your concerns aside and move ahead.
Home Sales Reach Record
U.S. home sales hit a new record last year, says the National Association of Realtors (NAR). Total sales of existing
houses went up more than nine percent in 2004, making it the fourth year in a row that transactions rose to a record.
NAR forecasts that in 2005 home sales will stay strong, although they'll dip a little as mortgage rate rise.
Home prices also will go up more than five percent, predicts NAR, after rising an average of eight percent last year.
Currently mortgage rates remain at low levels, even though consumer prices are going up. Last year higher fuel
costs helped push inflation to its highest point in four years. Eventually the combination of more-energetic inflation
rates and continued short-term rate increases from the Federal Reserve will cause mortgage rates to pick up. Locking
in great financing terms while they're still available is a wise choice - and that's true even if you prefer an
adjustable-rate home loan.
"Hybrid" adjustables are some of the most popular mortgages today. That's because they offer low adjustable rates that won't change for anywhere from three to ten years. In 2004 about 40 percent of all adjustable-rate mortgages were hybrids that offered an initial fixed rate for five years.
We can't be sure how long today's attractive rates will be available. So no matter which loan works best for you, it's important to move as quickly as possible. Contact us soon to discover more about today's positive borrowing choices.
Americans Keep Improving
Higher real estate values have caused home equity to go up "by a mind-blowing $5 trillion since 1995," writes syndicated
columnist Kenneth Harney. He adds that new research from Harvard University shows Americans "have been plowing that
value back into their homes at a dizzying pace - nearly one-quarter of a trillion dollars toward home improvements
each year."
Harney explains that "those improvements usually help pump up home values even more." Additionally, "owners are focusing
on high-end kitchen transformations, multi-room additions, lavish bathrooms, spas, entertainment rooms and other upscale
renovations. Think big ticket," Harney says.
Your plans may call for adding a deck, installing an energy-efficient furnace, or finishing a basement or attic.
No matter what your dreams are, you can rely on us to help you obtain the funds you need at attractive terms. We'll show
you different ways of using your home equity to boost the value of your property, while also increasing your enjoyment
of living there every day. Contact us soon to get started on your home improvement project!
Overlooked Tax Breaks
Real estate is America's premier tax shelter. Most homeowners can deduct their mortgage interest and property tax payments, and also pay no taxes on their profits when they sell.
Additionally, tax authority J.K. Lasser notes that some of the most-overlooked deductions can help you to educate a child,
grandchild, or spouse. Here are ideas to investigate:
- "Hope" credits can reduce your 2004 taxes by up to $1,500 for each student you're sending to a post-secondary school. These credits apply just to tuition costs in the first two years of higher education.
- Lifetime learning credits up to $2,000 annually can be claimed in a broader range of situations, including classes taken to improve job skills.
- Student tuition and fees can be deducted up to $4,000 annually if you don't qualify for a Hope or lifetime learning tax credit.
- Coverdell Education Savings Accounts and Qualified Tuition Programs (529 Plans) can help you save for education expenses. You can put up to $2,000 per student each year into a Coverdell Account, while state laws govern 529 Plan contributions.
You aren't taxed on any earnings in these accounts, and withdrawals aren't taxed if they're used to cover education costs.
Funds in Coverdell Accounts also can pay expenses for children in kindergarten, elementary, and secondary schools.
Certain conditions must be met in order to claim these tax benefits. Have a qualified tax advisor go over your situation with you to see how you can save on taxes while helping a young scholar.
Reaching for Your Dreams
Owning a home is a major goal for many households. Fortunately, buying a house also helps you achieve other objectives. Here are some examples of dreams that homeownership can make real -
- Caring for your family. Having a special place of your own provides safety and security for everyone in your household.
- Enjoying more freedom. Some folks believe that buying a house ties them down, but actually the opposite is true.
Homeowners benefit from ever-growing real estate values. In the future that will make it easier for you to move to a bigger house or better neighborhood.
Wealth achieved through homeownership also can give you the opportunity to start a business, pay for children's educations, or retire at ease. Feel free to contact us to learn more about how homeownership can assist you in reaching your life goals.
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