VA Loan / Veteran Mortgage News
Bruce Reichstein (NMLS #273132) is Sr. Loan Officer specializing in VA Home Loans with Emery Federal Credit Union and VALoans.com. Bruce has originated and underwritten VA loans in all 50 states for over 25 years and is a Nationwide Lender.
July 2007
The Best Home Mortgage Program for Veterans Goes to the VA
by Bruce Reichstein, VA Automatic Underwriter, VALoans.com
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 again this year, for it won three years in a row.
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 97% Loan to Value FHA Fixed Rate Loan
- 30 Year 100% Loan to Value 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 $225,000 home purchase price as of June 28, 2007,
with the subject property being located in the State of Texas and the appropriate costs being
applied to the borrower. The rates for each program selected had "0" points.
| |
CONV. 97% FIXED |
FHA
FIRST TIME |
VA |
| Loan Amount after Down Payment |
$218,215.00 |
$221,523.00 |
$229,837.50 |
| Fees: MIP / Funding |
$0.00 |
$3,273.75 |
$4,877.50 |
| Fees: Appraisal |
$325.00 |
$325.00 |
$325.00 |
| Fees: Credit Report |
$20.00 |
$20.00 |
$20.00 |
| Fees: Underwriting |
$485.00 |
$0.00 |
$0.00 |
| Fees: Tax Service |
$92.00 |
$92.00 |
$92.00 |
| Fees: Flood Certificate |
$25.00 |
$25.00 |
$25.00 |
| Fees: Doc Prep |
$100.00 |
$100.00 |
$100.00 |
| Fees: Closing Fee |
$375.00 |
$375.00 |
$0.00 |
| Fees: Per Diem Interest |
$284.18 |
$154.00 |
$154.08 |
| Title: Abstract/Search |
$150.00 |
$150.00 |
$175.00 |
| Title: Closing/Escrow Fee |
$150.00 |
$150.0 |
$0.00 |
| Title: Endorsements |
$100.00 |
$100.00 |
$150.00 |
| Title: Insurance |
$300.00 |
$300.00 |
$225.00 |
| Gov't Fees: Recording |
$135.00 |
$135.00 |
$135.00 |
| Add'l: Survey |
$300.00 |
$300.00 |
$0.00 |
| Add'l: Courier / Notary |
$75.00 |
$75.00 |
$75.00 |
| Add'l: Record Assignment |
$30.00 |
$30.00 |
$30.00 |
| Total Est. Closing Costs |
$2,472.00 |
$2,177.00 |
$1,352.00 |
| |
| Reserves: Hazard Ins. (14 mos.) |
$1,050.00 |
$1,050.00 |
$1,050.00 |
| Reserves: All Taxes (4 mos.) |
$1,125.00 |
$1,125.00 |
$1,125.00 |
| Total Est. Closing Costs |
$2,175.00 |
$2,175.00 |
$2,175.00 |
| |
| Downpayment |
$6,750.00 |
$6,750.00 |
$0.00 |
| Total Needed at Closing |
$11,397.00 |
$11,102.00 |
$3,527.00 |
| Interest Rate |
7.375% |
7.000% |
6.875% |
| Principal & Interest |
$1,507.40 |
$1,473.80 |
$1,509.87 |
| Mortgage Insurance |
$129.13 |
$90.52 |
$0.00 |
| Real Estate Taxes |
$281.25 |
$281.25 |
$281.25 |
| Hazard Insurance |
$75.00 |
$75.00 |
$75.00 |
| Monthly House Payments |
$1,192.78 |
$1,920.57 |
$1,866.12 |
The results of our analysis clearly show that the VA loan requires the least amount of down payment
($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. 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. The Veteran will also experience lower closing costs because the VA will not
allow the Veteran to pay certain closing costs which must be paid by the seller.
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 along
with the costs associated with each loan type. All rates that were quoted are subject to change at any time.
Today's Selling Tips
Home sellers today must look carefully at their local market to set a realistic asking price. Often they'll find
certain home sizes and neighborhoods are in demand, while other properties are staying on the market longer.
Too many sale houses are causing prices to soften in some areas. When buyers have plenty of properties to choose
from, it's important to make your home stand out from the crowd.
Some sellers are offering to lease their house, while giving renters an option to buy it in the future.
But there are several potential pitfalls with these arrangements. First, you must complete a sale within
three years to shield your profits from income tax. Owners must have lived in a house two out of the last
five years to gain that tax benefit.
Generally the sale price on a lease option is set at today's market value. But if home prices don't rise,
your renters may decide not to purchase when their lease is up. You also may not be able to charge enough
rent to cover your mortgage, homeowners insurance, and property tax payments. That's especially true if the
renters expect you to credit part of their rent payments against the eventual sales price.
But owners who don't offer a rent credit are giving their tenants less incentive to exercise the purchase option.
Negotiating these matters and fashioning a suitable legal agreement also takes effort. Additionally, you don't
know if your tenants will be able to qualify for a loan when it's time to purchase. Over two years their financial
situation may change.
Attract Buyers
Sellers also need to be careful when working with existing homeowners. If they make an offer contingent on selling
their current house, you are accepting the risk that their home may not sell quickly.
But the most important issue for a rapid sale now is setting your price accurately. Pricing high in order
to leave negotiating room can be a mistake in today's market.
Your goal is to offer a great value when compared to similar homes. It's smart to look at other sale houses
before setting your price, to make sure your property's features are more attractive to buyers than what
they'll see in similarly-priced homes.
Protect Yourself When Buying
Several safeguards help insure that homebuyers receive a good deal. Understanding how they work together lets you
use those resources to your advantage. An appraisal shows that the house you're buying is priced fairly by comparing
it to similar homes which recently sold. Professional home inspections also help you determine if you've
located a bargain. Inspectors make sure problems aren't present in a home's structure and internal systems.
We often buy a house based on its appearance, but inspectors can reveal weaknesses we probably won't see.
Have a home inspector point out trouble spots to you, and make sure you understand their implications before buying. A pest inspection also looks for termite infestation.
If the house you're considering has been added on to, it's also smart to check with your local building department to make sure permits to do that work were granted. And even if you're buying new construction, it's best to hire a professional inspector to make sure the house is built soundly.
Disclosures made by the seller should inform you about any known defects - even if they've been repaired. However, disclosure requirements differ from state to state.
It's also a good idea to find out from the seller how old the furnace and roof are. Even if they're in workable condition now, knowing their age can give you an idea of how soon they'll need to be replaced.
Title insurance guarantees that no one can assert an ownership right to your house because of something which occurred before you purchased it. If the heir of an earlier owner or a previously-unpaid contractor tries to make a claim, you'll be protected.
Vacation Homes are Hot
Second homes made up 38 percent of all real estate purchases in 2005-06, reports the National Association of
Realtors (NAR). Owners buy these properties for investments or vacation homes.
NAR says a typical vacation home buyer is 52 years old and married. About one in five purchasers choose a condominium.
Many owners buy with the idea they'll retire in their second home. At that point they can use the
profit from selling their current house to bolster their retirement savings.
Yet those plans can change over time. A typical second home is held for 15 years, but 45 percent of older
owners sell within six years. Changes in health and marital status are the main reasons behind that choice.
Retirees who moved to warmer climates in their 60's increasingly want to be closer to family after they
reach age 75. Many are choosing a retirement community close to where their children live, reports The New York Times.
Keep Good Records
Second home owners need to keep accurate records to show which property is their principal residence. You can claim up
to $500,000 in tax-free profits after selling your primary home. If you rent out your vacation property part
of the time, it's also crucial to maintain good records for income tax purposes. Keep track of deductible expenses, and
how many days you rent it.
Owning a second home can enhance your life. Many owners appreciate having different interests they can pursue,
depending on where they're living at the time. Usually they enjoy a nice gain when it's time to sell, as well.
Contact us now to find out how you can purchase a great second home soon.
