if you want to save a lot of money and you happen to be a Veteran then you need to read this article I will be telling you how you can save a good chunk of cash, find out how you can get up to $1,500.00 towards the closing costs. Now if you are Vet like me ( I was in the Marines, nothing personal if you were not ) and you have been thinking about how to get a home loan because you have a goal of buying a house or because you are in need of refinancing your home. Then you really need to know the benefits of getting a VA home loan as well as getting started, because as a veteran, VA home loans do offer you some very good benefits. But before you can get your va home loan there is one thing that you will have to do, and its something that everyone has to do to get their Home loan Benefits. I will talk about that at the end of this post but for now we will go over some of the benefits of a VA Home loan. If you are a veteran and have not looked in getting a home using your VA benefits, it may be a good time to just see what you may qualify for.
Getting a VA home loan is one of the benefits that a Veteran has so that they can become a home owner, WITH LITTLE TO NO MONEY. There are other home loan programs available, such as a conventional home loans, or FHA home loans. But the VA home loan has a couple of very important features 1) is NO MONEY DOWN , THAT IS ZERO, NO DOWN PAYMENT. 2) Unlike a FHA loan that has mortgage insurance with an upfront fee and a monthly fee that can add several hundred dollars to the mortgage payment. VA does not have a monthly mortgage insurance payment tacked on top of your mortgage payment. Which allows you to either qualify for more house and even have a lower payment than someone with a loan amount as yours but they have a FHA loan.
You don’t need to have a perfect credit to get a VA home loan you can get home loan with scores as low as 550. Compare that to a FHA loan and with the same scores, minimum down payment would be 10% VA will still allow you to come in with zero down. Please keep in mind that down payment and closing costs are two different things you still have to pay for escrow fees, the appraisal etc. Which can be a few thousand depending if the seller is willing to pay for any of the closing costs.
If you think you are ready to start the process on using your VA benefits to get a home loan one of the things you will have to do is apply for your certificate of eligibility. Click Here, and just follow the instructions, you will need to get your certificate of eligibility in order to get your VA home loan.
Something to keep in mind that even though there is not a monthly mortgage insurance fee added to your payment VA does charge what they call a funding fee that can be financed on top of your loan. If you have never used your VA benefits then the funding fee is 2.15 % of the loan amount and is added to the total of the loan amount. If you have used your VA benefits before then it does go up to 3.3%. It is a good chunk of change but you still coming in with nothing down and you have no monthly mortgage insurance payment like you would with a FHA loan which can easily be $2-300 more a month every month for the life of the loan. Now VA is looking pretty damn cheap. Nothing is really free and the funding fee is really just in case you do not pay and there is a foreclosure done on the home. The funding fee is really like an insurance on the loan.
Now lets say you filed for Bankruptcy or you had to do a short sale or a foreclosure in a previous home you had and now you are recovering. On a bankruptcy you only have to wait two years after it is discharged from the date you filed but from the date it was discharged. Very important the date your bk is discharged don’t get a bunch of debt but start working on re-stablishibng your credit. The easiest and fastest way is getting a secured credit card or even getting added on to an account. Try to shoot for 3 trade lines they do not have to be big accounts can just be $500.00 accounts but they will count towards establishing some sort of credit history and will get you points going again.
Now if you did have to do a short sale or even a foreclosure you only really need to wait two years from that date to qualify again and use your VA benefits. There is one catch, if the VA lost money in that transaction you might not have full benefits but if you know you did do a short sale or foreclosure, the best thing to do is check with the VA on that. To see if you have full benefits or only partial.
if you are interested in getting a VA home loan just ask me.
Here is the thing you are basically forced to buy and pay for private mortgage insurance or PMI or principal mortgage insurance with the condition that you put down less than 20 percent on your home. It gives your financial institution an opportunity to recover its losses in case you face a dilemma at the time of repayment. At the time of the boom years, majority of home buyers did not even bother with it since there were loans with 100% financing well those days are over now. Not to mention as of now in 2013 FHA loans the mortgage insurance is for the life of the loan since FHA took so many losses.
The guidelines for private mortgage insurance on conventional loans usually allow you to request it be cancelled at the time of the balance of your mortgage when equals 80 percent of your house value. Now this is not automatic and you will have to request an appraisal to verify the value but it can be done. In case if you only put 10 percent down and your house values has dipped a bit or more than it make take some time in achieving the 80 percent mark. Nevertheless, simply because the values of your place has decreased, it doesn’t suggest you can’t get rid of PMI within a short time frame. You can always make extra payments to the principal to help pay down your mortgage as well. Fact of the matter is that you don’t qualify for automatic private mortgage insurance revocation until the mortgage balance reaches the figure of less than 80 percent loan to value.
The problem is that usually the insurance is a few hundred a month so that is an extra expense that does the home owner no good other than allowing him to get the home loan. One option that a buyer may have is paying an upfront mortgage insurance that can run about 2 % of the loan amount. But that is a one time fee and its paid at the time of purchase usually reserved for good borrowers. So for example on a 200k loan that may be 4k upfront but it can sometimes be financed into the loan BUT REMEMBER NO MONTHLY INSURANCE PAYMENT. But same scenario for example on a FHA loan you have to pay 1.75 % upfront and then 1.30 % monthly. So on a FHA loan that is $3,500. up front and then every month $216.67 EVERY MONTH. But again every scenario is different and the conventional is usually at least 5% down payment vs. the 3.5% down payment.
Is FHA worth it now for the house I want or should I wait and get conventional?
I can afford both. If I go with FHA I still want to put down 15%+ to keep the payment lower. But if I went conventional I’d go 20% down but my DTI comes into play which is where I’m on the cusp of not getting approved via conventional because of my DTI.
I think that you should definitely consider the conventional loan. If you make a 20% down payment, then you will not need mortgage insurance.
A FHA loan will include both upfront mortgage insurance as well as monthly mortgage insurance payments. In addition FHA premiums are set to increase in April 2013. (Cancellation policy will change in June 2013).
It is not clear why you would qualify for a FHA loan (with Mortgage Insurance payments) and not qualify for a conventional loan. The DTI requirements for a FHA loan are 31% (upfront DTI which includes all housing related expenses) and 43% for the total DTI. Conventional loans are available up to 45%,
No matter which loan you choose, make sure that you have sufficient capital reserves and emergency savings funds. Also, I recommend that you don’t max out on your DTI. Make sure that you take care of your other debt payments.
I recommend that you shop around. Check out mortgage rates at Bills.com: http://www.bills.com/mortgage-rates/ and then get a quote for different types of loans. Ask the lender for a pre-approval, based on documents which prove your income and credit. But there is no reason why you would not qualify for a conventional if you qualify for an FHA just because of the PMI not being an issue. Another thing to think about is that the PMI on a FHA loans is for the life of the loan now so if you can put down 20% why wouldn’t you?
Reality is that interest rates are still extremely low and depending where you are at in the nation even home prices are still very low. They may have come up a bit as compared to a year ago but over all they are still low. Not mention depending on where you live you can probably buy a home with a monthly payment that is the same or even less than what rent will cost you. I know in Santa Maria, Ca. that holds true for most homes here for sale. But I also know there are tons of people that can buy a home now but are waiting for one thing or another. At the same time there are others that have issues with their credit that could buy a home if they just took care of the issues holding them back but for what ever reason still have not done a thing. Everything is about timing and for those that may need some financing and need to get an FHA loan are going to find it more expensive, failure to do something can cost you some money.
The important thing to know about FHA making these changes, are due to losses that they have been taking. Right now FHA is in the red $ 32 Billion that is a Billion with a “B”. In order to keep this loan program afloat and not another bailout deal they have to raise funds and pass those savings on to the new potential borrowers looking to get a home loan. Right now Mortgage insurance is 1.25% of the loan spread out over the year. But may be increasing to 1.35 % next year. On a 200k loan that is roughly $208.00 vs $225.00, not a big deal right? Just a $17.00 extra month .. but that is also $204.00 extra a year. Here is where it gets good, right now mortgage insurance drops off after 5 years. Well new changes with an FHA loan is that it becomes permanent for the life of the loan and they only way to get rid of it is to refinance into a conventional loan showing that you have more than 20% equity. So now you can see the cost because even a refinance is not free that alone will cost you at least 3k if you want to get rid of that Mortgage insurance. But it does not end there.
They will be more additional new consumer counseling programs to insure that consumer knows they are getting into a home loan and can budget accordingly for a home purchase. Yes this will cost you money as well, reality is nothing is really ever free. Aside from that there are a few additional changes that will affect underwriting and how easy or not it will be to get that loan. For example as of next year the Frank Dodd act goes into effect which will limit the debt ratio to 43% a person can have to qualify for a home loan. What doe that mean anyways?? Debt ratio. Simply put you make a $ 1,000.00 your total expenses, credit cards and your new mortgage payment cannot exceed $430.00 a month. Right now if you decent reserves, you can go as high as 55% debt ratios. Basically you are going to have make more money to buy the exact same house next year.
Everything is subject to change but for now this is what is coming. Basically it will cost you more money to get a home loan and it will get harder. If you want to see what you can qualify for give me call.