It’s official. Included in the Housing and Economic Recovery Act of 2008 that President Bush signed, is Section 2201 that calls for the “Temporary Increase in Maximum Loan Guaranty Amount for Certain Housing Loans Guaranteed by the Secretary of Veterans Affairs”.
In essence, from July 30th 2008 – January 1st 2009, the VA Department will increase their guaranty amount to cover 25% of the greater of the two:
- $625,500 (for Hawaii, Alaska, Guam and Virgin Islands), or $417,000 (Continental 48 states).
- 125 percent of the area median price for single-family residence, up to $1,094,625 (Hawaii, Alaska, Guam and Virgin Islands) or $729,750 (Continental 48 states).
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Our main goal here at HawaiiVALoans.com is to educate current military personnel and Veterans about their VA Loan Benefits. When you look at the benefits that the VA Home Loan Program provides compared to doing a conventional mortgage – you truly realize how advantageous it is to be a VA eligible home buyer.
In addition to these benefits, most current military personnel have another great advantage in that they currently receive a monthly housing allowance to pay or subsidize their housing payments. This housing allowance, also known as BAH, can range from $1491 – $3419 per month depending on rank and whether this person has dependents or not.
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If you’ve ever purchased a home before, you’ve probably been asked if you wanted to “points” or not pay “points”. Now, if you are like most people, the common answer would be, “I’m not sure – what would you suggest?”. Well, before we get into the specifics of when it is beneficial to pay points or not, let’s go over what the exact purpose of paying points at closing.
A point is an upfront fee that is paid at closing to reduce your interest rate. One “point” is always 1% of the loan amount. For instance, using a $300,000 loan amount, one point would cost $3,000 at closing. Now keep in mind – you usually don’t have to pay points if you don’t want to (except when dealing with adjustable-rate mortgage loans – where sometimes it’s mandatory to pay a point to guarantee the lender a yield) but by doing so, you’ll decrease not only your monthly payments but also the total amount of interest paid over the life of the loan.
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The last 5 years or so, finding financing to purchase a home with no down payment was relatively easy – granted you had a decent credit score. There were an abundance of 2nd mortgage products available so you can do an 80/20 loan (80% first mortgage and 20% 2nd mortgage) and avoid paying Private Mortgage Insurance (PMI).
Now if you didn’t want to pay the higher rate with the 2nd mortgage – you could just do one loan and pay the PMI. The PMI would add a few hundred dollars to your monthly mortgage bill, but at least you didn’t have to place a hefty down payment to buy the property.
Well things have drastically changed over the last 6-8 months. The lax mortgage lending guidelines that were in place during the recent real estate boom we’ve experienced has finally caught up with many lenders. Even with Hawaii’s real estate market not seeing the same dramatic drop in values as the case with most cities in the continental US – we are still affecting by this.
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Many people know the benefits that VA Loans have when purchasing a property. No down payment required, no Private Mortgage Insurance, reduced closing costs, among others. But many VA mortgage holders don’t realize that they have another huge benefit. When interest rates drop – VA mortgage holders can easily reduce their rates through a streamline process – also known as the Interest Rate Reduction Refinancing Loan (IRRRL) Program.
The IRRRL Program, or VA Streamline Refinance, allows a current VA mortgage holder to reduce their interest rate without extra requirements needed by conventional mortgage holders.
- No Appraisal Required
- No Income Verification
- No Asset Verification
- No Out-of-Pocket Expense
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3 Minute Thursdays: 3 Options When Your Appraised Value is Low
VA Funding Fee Changes – Or Not!