VA Loan / Veteran Mortgage News
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DECEMBER 2005
2006 VA Home Loan Amount Increases to $417,000
The Veterans Benefits Act of 2004 changed the Maximum Guaranty Amount to an amount equal to 25 percent of the Freddie
Mac conforming loan limit determined under section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act for
a single family residence, as adjusted for the year involved. The 2006 limits have been announced.
Effective on all loans closed on or after January 1st, 2006, the maximum guaranty for loans in the normal areas is
25% of $417,000, which is $104,250. Under Freddie Mac's charter, maximum original loan amounts are 50% higher for
first mortgages on properties in Alaska and Hawaii. In these areas, the maximum guaranty is 25% of
$625,500 or $156,375.
To illustrate, the maximum guaranty for 2006 would be $104,250. This is 25 percent of the 2006 Freddie Mac conforming
loan limit for a single family residence of $417,000.
Happy New Year And Welcome 2006
We hope you're feeling renewed and ready for a clean calendar. Each year stands out in its own way, and 2006 is
certain to provide its share of memories. Your housing needs may change in the new year. If so, contact us to
discover ways to purchase a home you'll love.
We also can help you obtain funds to make important home improvements or pay off nagging bills this year. Many homeowners
find it's helpful to regularly review how well their existing mortgage suits their current financial
circumstances, as well. You can always call on us when you have a question about real estate financing. We look
forward to helping make 2006 a great year for you.
2006 Real Estate Outlook
Rapid home price increases continued in much of the country during 2005. You can see in the chart here how values went
up in different regions over the twelve months ending September 30, 2005. Price rises will slow in 2006, since the
recent pace can't be sustained long-term. Economists at the National Association of Realtors (NAR) forecast
house prices will go up an average of 5.3 percent this year. Economists also expect mortgage rates to rise
gently in 2006, as they respond to continued increases in short-term rates by the Federal Reserve. Yet home
loan rates will remain at historically attractive levels.
Buyers will have more houses to choose from as sales slow slightly. Still, NAR predicts 2006 will bring in the
second-highest total for home sales ever recorded. Solid fundamentals will keep real estate healthy, explains
NAR Chief Economist David Lereah. Growing numbers of households at all age levels insure there are buyers for
starter, move-up, vacation, and retirement homes.
Plenty of eager buyers, along with low mortgage rates, have caused prices to go up at a quick pace.
Demand for homes remains strong today, despite higher rates. A less-frothy market in 2006 should keep home prices
affordable, says NAR. Buyers with a long-term view know that now is a good time to purchase real estate.
We're ready to help you finance your next home. You can count on us to match a mortgage to your specific needs,
and make sure the process goes smoothly for you.
Save When Buying
Borrowers who plan to stay in their house for years can save money by paying points when they get their loan.
Points are upfront payments to a lender that reduce your interest rate. A point is equal to one percent of the loan
amount. Paying one point one a $300,000 mortgage would cost $3,000. Points paid when buying a house are
tax-deductible. But finding the cash to pay points is tough for most buyers.
However, you can ask a home's seller to pay points for you. Sellers often are willing to do this, instead
of reducing their asking price. Home sales are slowing in many areas of the country, giving buyers more leverage
when negotiating. Sellers also can pay some closing costs, which will allow you to devote more cash to your down payment.
Typically a buyer can deduct the cost of points even if the seller is providing them. Lowering your interest
rate by paying points also can help you to qualify for a home loan.
Contact us soon to find out how getting a loan can be easier by obtaining help from a seller. We'll show you how
to calculate the effect paying points will have on your housing cost over time.
Ready to Improve
Improving your house lets you gain the greatest possible value and enjoyment from owning. Current forecasts call for American homeowners to increase their remodeling projects in 2006. Taking time to plan your project means it's more likely to be done on time, on budget, and perform just as you expect. Although it's exciting to pick new cabinets or paint colors, focus just as much on what you can't see.
An owner who needs a new roof should make sure the contractors check the asphalt felt layer underneath the shingles. A roof that's been re-shingled twice should have the old layers taken off first. Otherwise installation would be difficult through so many layers of shingles, and the roof's total weight could cause your rafters to sag. Also make sure your attic's ventilation and insulation are adequate.
Someone planning an entertainment center should be certain their house has enough electrical circuits and amperage to handle the new load. Paying attention to an entire project also requires thinking about where you'll place your new cabinets and appliances to make a busy kitchen or bathroom more efficient. Fortunately, improved appliances may allow you to find a smaller refrigerator or washing machine. Don't order your cabinets until you're certain about the dimensions of your new appliances.
A Smart Move
Many homeowners will refinance their properties in 2006, experts predict. Some will do so to move their adjustable-rate mortgages to stable fixed rates. Others will refinance into better rates as their credit scores improve. Owners will borrow against rising house values to obtain funds for paying off credit card bills or making home improvements, as well.
Owners also can take cash out for a down payment on a second home. Folks who would have used an adjustable-rate home equity credit line for that purpose a year ago often find a second mortgage or a first mortgage refinancing can save them money now. Contact us when you need real estate financing this year. Also let your friends, family, and co-workers know how our professional skills and experience can help them reach important life goals in 2006.
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