Teddy Riner DMS's Blog
There are a number of programs, government-sponsored and otherwise, that are designed to help aspiring homeowners find and get approved for a mortgage that works for them.
Among these are first-time homeowner loans insured by the Housing and Urban Development Department, mortgages and loans insured by the USDA designed to help people living in urban and rural areas, and VA loans, sponsored by the U.S. Department of Veterans Affairs.
In today’s post, I’m going to give you a basic rundown of VA loans, who is eligible for them, and how to apply for one. That way you’ll feel confident knowing you’re getting the best possible deal on your home mortgage.
What is a VA Loan?
VA loans can provide soon-to-be homeowners who have served their country with low-interest rates and no private mortgage insurance (PMI).
If you’re hoping to buy a home soon and don’t have at least a 20% down payment, you typically have to take out private mortgage insurance. This means paying an extra insurance bill on top of your monthly mortgage payments. The downside of PMI is that it never turns into equity that you can then use when you decide to move again or sell your home.
Loans that are guaranteed by the VA don’t require PMI because the bank knows your loan is a safer investment than if it wasn’t guaranteed
VA loans may also help you secure a lower interest rate, or give you some negotiating power when it comes to discussing your interest rate.
Finally, VA loans set limits on the number of closing costs you can pay in your mortgage. And, if you’ve ever bought a home before, you’ll know how quickly closing costs can add up.
Who is eligible?
There are some common misconceptions about who can apply for a VA loan? So, we’ll cover all the bases of eligibility.
If you meet one of the following criteria, you may be eligible for a VA loan:
You’ve served 90 consecutive days during wartime
You’ve served 181 days during peacetime
You’ve served six or more years in the Reserves or National Guard
Your spouse died due to their work in the military
There are some restrictions to these eligibilities. For example, your chosen lender may still have credit score minimums.
Applying for a VA Loan
There are two main steps for applying for a VA Loan. First, you’ll have to ensure your eligibility. You can do this by checking the VA’s official website. Be sure to call them with any questions you may have.
Next, you’ll need a certificate of eligibility. The easiest way to acquire one is through your chosen lender. If you haven’t chosen a lender, you can also apply online through the eBenefits portal, or by mailing in a paper application.
Once you have a certificate, you can apply for your mortgage and you’ll be on your way to buying a home.
If you’re buying your first home, there are plenty of things that you’ll need to know. Being informed will allow you to avoid some of the most common mistakes that first-time homebuyers make. These errors and their remedies can be found below. Don't join the crowd and make an error, know before you buy.
They Don’t Have Enough Funds
Every homebuyer plans for mortgage payments. Not every buyer plans for all of the other costs that go along with buying a home. Just because you can afford mortgage payments doesn't;t necessarily mean that you can afford the house.
There’s so much financially that goes into owning a home. You’ll need to plan for things like home maintenance, insurance, taxes, closing costs, and more. All of this will need to be saved ahead of time in order to buy and maintain a house. Things like property tax and insurance can go up yearly, and these costs can be very unexpected.
Not Securing A Loan
If you don’t secure a loan first and find the home of your dreams, you could be in for trouble. If you haven’t been pre-approved for a mortgage, finding a home and putting an offer in is a bit riskier. Many buyers don’t realize that they can’t qualify for the amount of loan that they think they can. Getting pre-qualified allows buyers to understand just how much house they can afford.
Avoiding Real Estate Agents
If buyers go it alone, they are taking a risk. The seller pays the real estate agent fees in a home transaction. You really have nothing to lose getting a professional to help you. From there, your agent can recommend all sorts of professionals to assist you in your home search including lawyers, mortgage companies, home inspectors, and others. It’s essential for a smooth home transaction to work with people who are experienced and know what they’re doing.
Depleting Your Savings
When you buy your first home, you’re going to need a reserve of cash beyond what you have saved for a downpayment. This cash includes an emergency fund, money for repairs, furniture, new appliances, and other unexpected expenses. If you use all of your savings on a downpayment, you’ll be in a dangerous financial situation. Just make sure you have saved enough extra for a rainy day fund.
Opening New Accounts
Before your loan is closed, you should be frozen- financially frozen that is! Don’t open any new accounts. It can be tempting to head out and buy a new car that will look good in your new driveway or to fill your house with all sorts of brand new furniture, but you should wait. Once you get the keys to your new home, you’re in the clear to spend again and open new accounts. You don’t want to overextend your budget of course. Just be sensible!
It must have been frightening, in the days before the internet, to move to a new place that you knew little about. The culture, the people, the things to do--all of these things are now at our fingertips thanks to Google and others.
However, it can still be difficult to get used to a new town, especially if you’re moving far away from your previous home. So, in this article, I’m going to give you some tips on how to investigate your new town. That way, you’ll have a good idea of what kind of things you can do for fun, where to eat, and countless other things you might want to know about the place you’ll soon call home.
The lay of the land
A good place to start your search is on Google Maps. From here you can explore your future neighborhood; find out how close you are to grocery stores, parks, hospitals, and even get an estimate on how long your work commute will take each day.
Since many of these places will have ratings and reviews, you can also take some time to read the reviews for popular places around town.
Eating around town
It can seem like you’re always flipping a coin when you eat at a new restaurant. When you move to a new town, you’ll have to discover new favorite places to eat. However, you don’t have to do these experiments on your own.
Check out Yelp reviews for local restaurants and cafes to get a sense of the pricing and atmosphere. This way you’ll give yourself the best possible chance of enjoying the experience.
Meeting new people
Making friends is hard enough as an adult. In today’s world, many people meet their friends online or through other connections, rather than simply hanging around with their neighbors.
Luckily, sites like Facebook and Meetup make it easier to introduce yourself to like-minded people.
Browse local meetups that you’re interested in, and don’t be afraid to try out a new activity or attend a paint night--you might meet new people and discover a new hobby all at once.
Most towns have a strong presence on Facebook in terms of things like groups and events. Joining local groups will give you an idea of the type of things people do for fun around town and give you a way to introduce yourself to new people.
Read the news
Many towns are covered by a local or regional newspaper. They can often be found online or at a local library or cafe. These newspapers are often the key to discovering the good and the bad about your new home, tipping you off to the things you’ll want to pay attention to when you move.
There are so many factors that go into finding and securing the financing to buy a home. While lenders require quite a bit of information for you to get a loan, you still need to be aware of your own financial picture. Even if you’re pre-approved for a certain amount of money to buy a home, you still need to dig into your finances a bit deeper than a lender would. The bottom line is that you can't rely solely on a lender to tell you how much you can afford for a monthly payment on a home. Even if you’re approved to borrow the maximum amount of money for your finances to buy a home, it doesn’t mean that you actually should use that amount. There are so many other real world things that you need to consider outside of the basic numbers that are plugged into a mortgage formula.
Run Your Own Numbers
It’s important to sit down and do your own budget when you’re getting ready to buy a home. You have plenty of monthly expenses including student loan debt, car payments, utility bills, and more. Don’t forget that you need to eat too! Think about what your lifestyle is like. How much do you spend on food? Do you go out to the movies often or spend a regular amount of cash on clothing? Even if you plan to make adjustments to these habits when buying a home, you’ll want to think honestly about all of your needs and spending habits before signing on to buy a home.
Now, you’ll know what your true monthly costs are. Be sure to include things like home insurance, property taxes, monthly utilities, and any other personal monthly expenses in this budget. If you plan to put down a lower amount on the home, you’ll also need to include additional insurance costs like private mortgage insurance (PMI).
The magic number that you should remember when it comes to housing costs is 30%. This is the percentage of your monthly income that you should plan to spend on housing. Realistically, this could make your budget tight so this is often thought of as a maximum percentage. By law, a lender can’t approve a mortgage that would take up more than 35% of your monthly income. Some lenders have even stricter requirements such as not allowing a borrower to have a mortgage that would be more than 28% of monthly income. This is where the debt-to-income ratio comes into play.
As you can see, it’s important to take an earnest look at your finances to avoid larger money issues when you buy a home.