Having little to no money in the bank can be one of the main deterrents to homeownership. In this case, the logical option would be to rent since it would be less cost upfront, right? Well, if you are eligible for a VA Loan, this may not be necessarily true. Let’s do the math!
Meet Cindy, Joe & Mark
Cindy & Joe are both looking to buy a $500,000 property. Joe is eligible to finance the purchase through a VA Loan. Cindy on the other hand is not VA eligible, and will purchase via a conventional mortgage.
Now Mark is eligible for a VA Loan but feels like he can’t afford the upfront costs of buying a home right now, so he’s looking to rent. He’s looking to rent a home for about $2500, which is comparable to the $500,000 property that Cindy & Joe want to purchase (see rentometer.com).
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Right about now, you’re probably getting tired of reading headlines about how bad the real estate market is and that the financial world is on its way to a meltdown. Me too, but there’s another side to all of this, and one that you, on main street, can turn to your advantage. Guess who else is aware of this phenomenon. That’s right, every seller of a home currently listed for sale. Credit is tightening for other loan programs and, in many pockets, prices are lower than they have been in years.
As a VA eligible homebuyer, you can purchase one of these homes at a value not seen in years…and with potentially very little out of pocket expense. How so? Not only can you negotiate on price when buying a house, there’s another tool that can make getting into a home much easier, seller credit. A seller credit is an additional sum of money paid by the seller for you to use to pay the closing costs on your loan. Make sure to discuss this with your real estate agent.
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When we started HawaiiVALoans.com – our vision was to make it as easy as possible for those who may be eligible for a VA Loan to learn the basics of the VA Loan program; who’s eligible, the benefits of a VA Loan & how the home buying process works.
Step one was to create our site, HawaiiVALoans.com & the VA Loan Blog that has a wealth of information, tips and tools. Step two was to create our 21-page eBook – “VA Homebuyers’ Guide – Understanding Your VA Loan Benefits & the Home Buying Process” and so far, we’ve received great feedback on how informative this guide has been. Finally, we are at step three. In an effort to continually provide more FREE information to those who would like to learn more about the VA Guaranteed Home Loan program, we will be doing a free VA Homebuyer Seminar, which we plan on holding every month.
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This is our second installment of our segment, “What Can Your Housing Allowance Buy?”, in which we feature properties currently for sale and determine what pay rank in the military you need to be in order to have your housing allowance cover the the mortgage payments (with no down payment).
Today’s property is beautiful executive home that is listed roughly a $100,000 below the current tax assessed value ($694,200).
Ocean Pointe, Ewa Beach – $599,000
91-1051 Kaikala Street
Ewa Beach, HI 96706
Land: 4,491 sqft
Interior Living Area: 2,131 sqft
Bedrooms: 4
Bathrooms: 3/1
Monthly Taxes: $200
MLS #: 2813378
Description: Short Sell. New Ocean Pointe executive home never lived in! Home has over $73k in upgrades through the developer including recessed plantation shutters, 16 & 20 inch ceramic tiles throughout, Corian Countertops, and best of all a detached 2 car garage with separate mother-in-law studio or guest suite/game room.
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In our previous blog post we explained how homeownership may not be as hard as you may think – especially if you are eligible for a VA Loan. We touched on a few benefits of VA Loans which include 100% financing as well as reduced closing costs. We also explained that current military personnel have an added benefit in that they already receive a monthly housing allowance to pay or subsidize their rent or mortgage payments.
Today HawaiiVALoans.com is introducing a new segment to our blog called “What Can Your Housing Allowance Buy?”. With this, we will feature a specific property for sale to give examples of how much buying power one would have by just using their monthly housing allowance to cover their mortgage expense (with no down payment).
Mahi Ko at Waikele – $349,000
94-529 Lumiaina Street, #D101
Waipahu, HI 96797
Living Area: 830 s.f.
Lanai (Patio): 92 s.f.
Bedrooms: Two
Bathroom: Two
Parking: Two
MLS #: 2810757
Description: Exceptional Value: GROUND floor, CORNER unit with fenced large yard and patio-great area for BBQ. Ready-to-move in condition freshly painted, with laminate flooring and w-w carpet. Renovated kitchen w/new granite counter top, cabinets, refrigerator and washer- dryer, microwave oven. Hall bathroom: new vanity, toilet, ceramic flooring. Updated light fixtures in living room & kitchen.
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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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3 Minute Thursdays: 3 Options When Your Appraised Value is Low
VA Funding Fee Changes – Or Not!