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Why Refinancing a VA Mortgage right now can increase the value of your home in the future

Jun 2

Posted by Blog Admin in VA Loans | Comments off

While interest rates are at 30 year lows, many veteran homeowners wonder what other benefits would be available to them by refinancing right now.  Aside from the automatic reduction in their monthly payments, some wonder whether the costs involved are worth the reduction in their monthly payment.  Now obviously you can do some break even analysis by taking the monthly savings and divide the costs to determine whether or not the refinance is worth it according to your 5, 10, 15 year financial goals, but may I recommend another approach to keep in mind when determining whether refinancing at this time is right for you.

I would like you to think about the value of a historically low interest rate for the future buyer of your home.  The Veteran Loan has a unique attribute and that it is an assumable loan.  An assumable loan is one in which another party may “assume” the remaining principal balance on your loan.  With the interest rates being relatively low the past 15 years and all of the different programs available, the value of an assumable mortgage has not been talked about as much.  The reason for this is all of the different programs, enabled individuals to qualify for their own loan without a lot of documentation and the interest rates have stayed relatively low.  With the changes that have recently taken place, it is a lot harder for individuals to qualify for their own loan and as a result the value of an assumable loan naturally increases.

We do not know what the future may hold for rates, but chances are probably good that interest rates have the possibility to climb significantly in the future following these historic lows.  Ask yourself this question when the time comes to sell your property and you are able to offer an interest rate of 4.5%-5% on the property, when interest rates are at 8-9-10% for a 30 year fixed what kind of effect would that have on the value of your home?  Logic would lead me to believe that it could have a tremendous value in creating a larger pool of potential buyers for your property.

Offering a lower interest rate on your property, would enable a lot more options for people when trying to qualifying to purchase your home.  Let’s look at an example.  This example is evaluating only taking into account Principal & Interest.  It is also assuming that this individual does not have any other debt.

  • You owe $200,000 on your home and you refinance it to 4.75%.  Your P&I is now $1,048.51 due each month.  Your buyer that would be assuming your loan would only have to make $3,000 a month or $36,000 a year in order to qualify for this loan.
  • Buyer tries to get his own financing and interest rates are around 8%.  The P&I is now $1,474.87 due each month.  Your buyer would now have to make $4,250 a month or $51,000 a year in order to qualify to purchase your home.

Take a look at those two comparisons.  Keep in mind this is assuming that your future buyer does not have any other debt.  You will notice that the 2nd example would require a 42% increase in your future buyer’s overall income.  As you can see having that much lower interest rate assumable greatly increases the market for your home.  Many future homeowners that plan on keeping their home long term would be willing to pay a premium for an interest rate that low as well.  You could require a premium of cash in order for them to assume that loan.  You could then use this extra money to offset your future loan on your next property.  All and all you can’t go wrong refinancing to a lower interest rate, even if you plan on selling your home in the next 10 years.  The benefits will definitely offset the costs at that time, if you take advantage of the assumable features of the Veteran Home Loan.

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Now is a good time to move to Texas

Apr 17

Posted by Blog Admin in Military Living, VA Loans | Comments off

Now is a great time to move to Texas! There are quite a few reasons as a military family that this state will welcome you in with open arms.

One of the major reasons to move to Texas would be the overall friendly nature of the people that live in the state. Texas has a laid back open minded atmosphere and a casual feeling that is very welcoming to anyone who would want to move here. Most of the state is fairly patriotic and conservative, which many veterans find as an easy transition into a new area.

There are many large cities in the state, with surrounding suburbs, or small towns on the outskirts, so there are many different types of locations to choose from, all of which can be purchased with a Texas VA loan! Texas is an expanding state. There is room to grow, which is nice for any family. Right now, the housing is cheap and there are many opportunities for any kind of environment your family wants. In the city a variety of entertainment is available; shopping, bars and restaurants, theatres, galleries, and much more. In the suburbs and outside of the cities, there is hiking, parks, pools, lakes, rivers, the mountains, the beach, and again much more. It seems that there is an infinite amount of space in Texas. Don’t forget the warm weather, which allows an almost year round outdoor long play time. In fact, the heat in the summer is just about all that would keep you in at times, if at all.

Texas is home to many major attractions around the state to visit as well. The NASA Space Center is located in Houston. The Alamo is a very historically important monument for our country. It is located in San Antonio and symbolizes a battle where many Texans died. The Schlitterbahn Water Park and the Austin Zoo are just two places for tourists or locals to visit for a day of fun and relaxation. Texas as many national parks as well that can we visited for short trips or long vacations.

Another major reason that now would be a good time to move to Texas would be that this state is on the economic rebound. Opportunity for work is promising as jobs appear fairly plentiful. The financial magazine, Forbes, ranked small and large cities throughout America based on the best places for jobs in 2009. Texas claimed eight of the top twenty spots, including major cities Austin, Houston, San Antonio, Fort Worth, and Dallas. For the unemployed this could be a fantastic prospect for work. The energy and healthcare industries in Texas especially, have many facilities available to those in search of work.

Texas has many facilities available to its inhabitants. Its medical centers are superb. The state houses some of the best burn and trauma care centers in the country, as well many cancer research centers. There are numerous universities around the state, such as University of Texas, Texas A&M, Texas Tech, Texas Christian, Baylor, Texas Women’s University, and many more. The school districts are very highly recommend. Transportation is readily attainable, as there is easy access to public buses and cabs.

Now is a great time to move to Texas. The state welcomes new people in and is even offering jobs! With an abundance of entertainment, and a safe place for your children to grow up, your family will have a wonderful place to develop. There are 7 air forces bases, 7 military bases, 1 coast guard base, and 3 naval bases in the state as well. Many veterans already live here and feel comfortable with this atmosphere the state provides. Why not move here?

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Roadblocks For VA Purchase

Jan 9

Posted by Blog Admin in VA Loans | Comments off

VA loans have offered home loan financing for many years, and are considered a great opportunity for veterans whom qualify; allowing them to become home owners, even if they do not meet all of the standards that are expected of the rest of society on conventional loans. Among the many benefits of the VA loan, there are a few set backs or road blocks, that you will need to consider when trying to obtain a VA loan. These so called “road blocks” are not there to limit eligibility for VA loans (whether you are looking to get a Georgia VA Loan, or any other state VA loan), but to protect the lenders with certain guidelines. So here are the most common road blocks to obtaining a VA Loan

  1. With every VA purchase loan, there is a pest inspection that is required. This is routine, but can become frustrating to home buyers trying to purchase a home if something goes wrong with the inspection; although, this could also be a good thing because it makes borrower aware of any problems that there may be, before purchasing the home.
  2. If the property has a different source for main water, other than what is commonly used (i.e. a well for main source of water for home), they will be required to have an inspection on water, to insure that it safe, and meets local requirements.
  3. The loan also requires a full VA-approved appraisal inspection, which tend to be more stringent than normal conventional appraisals, and are to be completed by a VA-certified appraiser.
  4. There is a required residual income test that is performed when determining eligibility, to determine borrowers’ discretionary cash left at the end of every month; requirements can vary by region.
  5. Another important requirement for eligibility is based on honorable military discharge, without it you will not qualify for the VA loan entitlement.

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The Basics of a VA Loan

Dec 14

Posted by Blog Admin in Mortgage, VA Loans, VA Streamline | Comments off

Veterans Administration loans (VA loans) are among the most popular and widely used loans, with benefits available to members of the United States military and veterans. It is a loan that is guaranteed by the federal government, and available to veterans that are eligible. Though the loans are made by private lenders, but since they are guaranteed by the federal government, the lender is protected against loss should the borrower default on the loan. This is beneficial to both parties, allowing borrowers to receive a home loan with no down payment, negotiable interest rates, comparable closing costs to other loans or lower, no private mortgage insurance, and no prepayment penalties.

A basic VA home loan entitlement is $36,000, although, most lenders will lend veterans up to four times the amount of the veteran’s entitlement. For loans that exceed $144,000, additional entitlement may be available. As of January 2006, qualified veterans can now get a no down payment loan up to $417,000.

VA benefits are not only limited to new home buyers, veterans who already own their homes may also benefit from a cash-out refinance. A cash-out refinance allows you to get a lower-interest rate loan to pay off higher debt, to pay for home improvements, or make other major purchases.

How do you know if you are eligible for a VA loan? The first eligibility requirement is that you must be a veteran. However, being a veteran does not automatically does not necessarily guarantee a loan. Lenders must have proof of military service and discharge must have been honorable. Long-term reservists and National Guard personnel, as well as, surviving spouses of veterans who died during service or as a result of a service, may also qualify for VA mortgage benefits. The veteran must sign a certified statement saying that they will occupy the home, and the property purchased must be on U.S. soil or in a U.S. controlled territory.

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What is a VA Loan?

Nov 19

Posted by Blog Admin in VA Loans | Comments off

A VA loan is a mortgage loan that is guaranteed by the U.S. Department of Veterans Affairs, that was designed to offer long-term financing to eligible American veterans and their families. The VA loan program helps supply home financing to qualified veterans in areas where private financing is not generally available, and helps veterans purchase properties with no down payment.

The VA loan allows veterans 100 percent financing without private mortgage insurance or 20 percent second mortgage. There is a VA funding fee of up to 3.3 percent of the loan that must be paid, but is allowed to be financed. In a purchase, veterans may borrow up to 100 percent of the sales price or reasonable value of the home, whichever one is less. With no monthly PMI (private mortgage insurance), which is an extra insurance that lenders require lenders to pay if their loan amount exceeds 80 percent of their new home’s value, more of the mortgage payment goes directly towards qualifying for the loan amount, allowing larger loans without increasing monthly payments. However, in a refinance, veterans may only borrow up to 90 percent of reasonable value.

As far as eligibility, any veteran or person that is still in the Armed Services, that has not been dishonorably discharged, and who has served at least 181 days (90 days in wartime) is eligible for a VA home loan. A FICO credit score of 580 is the standard that the VA sets for home loans, although this can be flexible. Credit problems and debt income ratio can also be factors in eligibility; such as, bankruptcy or foreclosure without a one- to two-year record of good use of credit following.

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