What All Veterans Should Know-VA Home Loans and Federal Home Buyer Credit ExtensionsMarch 22th, 2010 The VA loan program has a lot of advantages. If you're a Veteran interested in purchasing a new home, you should definitely take time to investigate this unique home loan program. But before you do, understand that because VA loans target a very specific market, the guidelines can be confusing. That's why it's always a good idea to deal with a VA loan specialist who has plenty of experience with this type of loan.They will be able to find you the best VA loan available. The VA home loan program is probably the best loan program on the market today. One of the biggest benefits is the loan's zero down payment requirement. As is often the case, coming up with a down payment is usually the biggest hurdle to home ownership whether it's your first home or you're moving up to a bigger home. VA Loans for first time buyers You probably already know about the VA loan's zero down payment advantage. But if this is your first time buying a home, you may not know much else about these loans. Maybe you've decided you should wait to buy your first home until you're better prepared financially. The general advice is that if you have debt, you should pay it down. If your credit score isn't the best it can be, you should take steps to increase it. If you don't have money set aside for a down payment, you should start saving.This is all very good advice. But the advice doesn't always apply to VA loans. Because credit score guidelines are more lenient than those associated with conventional loans, your current credit score might be high enough to qualify. Plus, the VA appears to be the only guarantor offering the seller the option to help the buyer qualify by assuming a portion of the buyer's debt at closing. Finally, VA loans offer 100 percent financing so you don't even have to contribute financially to your home purchase. VA Loans for move up buyers The VA loan no money down advantage applies to first-time homebuyers and it applies to move-up buyers, too. If you're a move up buyer concerned that the sale of your existing home won't leave you with enough or any money to put towards a down payment on a new home, it's time to set those concerns aside. With a VA loan, it is possible to move up to a new home even with little or no money down. Right now it might make more sense to move up, even if selling your home means you don't make a profit. Here's why: Imagine we're back in 2007. Your family has outgrown its 1,400 square foot one-bathroom home and wants a home with more space. You find the perfect home that's nearly double the size listed at $440,000. You owe $190,000 on your home that's currently worth $270,000. Your realtor feels confident that after selling your current home and paying closing costs, you'll have about $60,000 available to use as a down payment. Rates on VA loans are being quoted at six percent. On a $380,000 loan, monthly payments not including insurance and taxes are around $2,278. After adding insurance and taxes, you figure your monthly payment is around $2,650; a bit more than you feel comfortable paying. Now let's apply that same example to today's housing market. That beautiful bigger home now lists for $340,000. That's great, but your home's value has dropped too. In today's market you're told you should list your home for $215,000. But that's not all. Your realtor advises you to pay the buyer's closing costs. Now after closing, and after factoring in the lower balance on your mortgage, you'll be left with about $6,000 to use as a down payment. That amount doesn't even qualify for the already low FHA 3.5 percent down payment requirement. But your parent is a veteran. So you make an offer of $340,000 on the bigger home with the contingent that the seller agrees to pay your closing costs, and the seller accepts. Instead of using your $6,000 as a down payment, you decide to spend it instead furnishing your new bigger home. You get a VA loan quote of 4.870 percent on $340,000 and now your monthly payment drops to $1798 and change, nearly $500 less than the mortgage payment would have been had you purchased 3 years earlier. And now you have more equity. But that's not all. Under VA loan guidelines, if you aren't interested in selling right now, maybe because you don't have equity, you can convert your home into a rental - no equity required. You don't even need experience as a property manager either. It's one of the best and easiest ways to buy a new home and keep your old home to use as a rental. However, there's a twist. You can only have one VA loan, so one property or the other will need a different type of financing. That is, unless you're married and your spouse also served. If he or she has VA entitlement, each of you can have a VA loan. Home Buyer Tax Credit Extended If you don't already know, the federal home buyer tax credit deadline has been extended. First-time home buyers may be eligible for a credit of $8,000. And now move-up buyers can take advantage of a tax credit worth $6,500. Along with the extension, income limits have also been increased. Veterans who purchase a home for the first time have until April 30, 2010 to enter into a purchase agreement and qualify for their $8,000 tax credit. Remember, more lenient credit scores and low or no money down benefits are available to veterans through the VA loan program. If you've never owned a home and think maybe it's time you should, get out there and start looking because time is running out. If you're a veteran and you have occupied the same home for five years, you may be eligible for the move-up home buyer credit. This is a tax credit worth $6,500. Don't let your current home's decreased value stop you from taking advantage of this opportunity. The example above shows that buying now using a VA loan could make good financial sense. But hurry because this deadline also expires April 30, 2010. A one-year extension on the federal home buyer tax credit is available to certain extended active-duty veterans who are serving or who have served overseas for a 90-day period between the dates of December 1, 2008 and May 1, 2010. Part of the qualifications require you to enter into a contract to buy a home by April 30, 2011. You also have to close the deal before June 30, 2011. This one-year extension is a terrific opportunity for active-duty personnel serving outside the United States. If that's you and you've been considering a new home purchase, don't miss your chance to take advantage of this generous tax credit. |
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