Want A Great Financial Future? 10 Things Veterans Need to Know About Their VA Home Loan Benefits

As a Veteran, your VA home loan benefit could be one of the most powerful ways you have to build a secure financial future for yourself and your family. Here are the top ten ways you can use the benefit to build your financial security:

1. Once you're eligible, your VA home loan benefit never expires.

Even if you never used your VA home loan benefit before, you can use it at any time. VA home loan benefits never expire. Only 13% of veterans nationwide have used their VA home loan benefit but 80% of veterans are homeowners. 

2. You can buy a home with a VA mortgage with no money down.

Think of what you could afford to do to improve your home or how you could use the cash you’ll save with no down payment required. 

3. You don't have to pay mortgage insurance with a VA home loan.

Many conventional mortgages require you to pay mortgage insurance which ranges from .45% to over 1% of the balance owed on the mortgage. There’s no mortgage insurance for a VA home loan.

4. VA home mortgage rates are lower than conventional loans.

VA home loan rates are usually at least .25% lower than conventional loans of the same amount.

5. You can use your VA loan benefit multiple times.

VA home loans are meant for your primary residence so you can’t use the loan twice at the same time — like buying a vacation home. If you sell your home and move or you’ve paid off your first VA home mortgage, you are eligible for the VA home mortgage again.

6. You can work with a local VA Mortgage lender, one with the Certified Veteran Loan Specialist designation.

The VA backs your mortgage with loan insurance called the VA guaranty. It doesn’t provide the loans. You can work with a local independent mortgage broker lender who’ll be flexible and meet your needs.

7. You can refinance your VA loan.

Can you get a better interest rate on your VA mortgage if interest rates fall? Yes. The VA Interest Rate Reduction Refinance Loan (IRRRL) is a streamlined refinance. You won’t have to provide pay stubs or for an appraisal for the streamline refinance program.

8. You can cash out up to 100% of your home's value in a VA cash-out loan.

If you have a current VA home loan, you can refinance your mortgage to take up to 100% of your homes value in cash. You can even lower your mortgage interest rate and get money for college tuition, home improvements, or other needs with a VA cash-out mortgage.

9. VA home loans have flexible credit score and financial requirements.

You don’t need a top credit score and may even be able to get a VA home mortgage if you’ve filed for bankruptcy. Individual lenders determine your eligibility.

10. VA mortgage county loan limits will be eliminated as of January 2020.

Up until January 2020, the limit for a VA home mortgage in Los Angeles and Orange Counties will be $726,525. But the program’s loan limits are being lifted starting January 2020. 

That means you could buy a property worth $1 million, $2 million or even more with your VA home loan benefit as long as you meet the income and credit qualifications determined by your lender. You can also take a tip from some financially-savvy Vets who’ve bought multiple unit properties, lived in one of the units, and rented the others out. VA home loans can pay for properties with up to 4 units as long as you use one of the units as your primary home.

Secure your financial future with a VA home mortgage, buy the home you want, and work with a VA home loan professional who understands the program and you and your needs.

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Should I Choose a 15 Year or a 30 Year Jumbo Mortgage?

Which is the wiser choice, a 15-year or a 30-year jumbo mortgage? Each has advantages and disadvantages, but for many buyers of executive estates, and other custom elite properties who plan to stay in the home or continue to own the property, the 15-year mortgage will be the better choice.

What are the advantages of a 15-year jumbo home loan?

A 15-year jumbo mortgage will be paid off in half the time of a 30-year loan. You will also pay significantly less interest. 

Let’s take a $1 million property where you have put $200,000 down and you have an $800,000 jumbo mortgage. 

At a 3.5% interest rate for a 15-year mortgage, you’ll make 180 payments of approximately $5,718, for a total of $1,029,240. Your total interest paid over the 15 years will be about $229,249.

Interest rates on 30-year jumbo mortgages are always half a percentage point or more higher than 15-year rates on jumbo loans. At a 4.125% interest rate on the same $800,000 jumbo home mortgage, you’ll make 360 payments of approximately $3,877. This is nearly $2,000 a month less than the payments on a 15-year loan on your $1 million home purchase.

However, at the end of 30 years, you will have paid a total of $1,395,720. Your total interest paid over 30 years will equal $595,720. 

What are the advantages of a 30-year jumbo home loan?

There is one advantage to the lower payments of a 30-year fixed jumbo home mortgage that some savvy buyers have taken advantage of. If you can afford the payments on a 15-year mortgage but select a 30-year amortization period, you are then free to invest the difference. How much money could you earn if you invested $2,000 a month over a 30-year mortgage period?

At even an anemic 2.5% rate of return in conservative savings investments, if you invested $2,000 a month for 30 years, you would have paid $720,000 and your investment value would be worth $1,077,247. Upping the rate of return to an average 6% used by many financial planners, your investment would be worth $2,031,378.

You have many choices when it comes to a jumbo home mortgage. Much of your decision will rest on your plans for the home. Do you plan to stay in the home or hold onto it as an asset? Or would you prefer a longer mortgage amortization period, lower payments, and the option to invest your money? Your answers will help you decide whether to choose a 15-year or a 30-year jumbo home mortgage.  Another topic to consider is how JUMBO ARM’s come into play. This is another interesting topic of conversation for many savvy home owners. Often times the interest rate on a jumbo ARM (adjustable rate mortgage) is much lower than a 30 year or 15 year fixed jumbo mortgage. These Jumbo ARMs are still fully amortizing loans but with fixed rates for 5, 7, or 10 years before they adjust. Many borrower refinance or sell the property before that time and benefit from paying a lot less in interest charges over that time

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Are You Considering Using Short-Term Rental Income To Qualify For a Refinance Say VRBO or AirBnB anytime soon?

What’s short-term rental income? It’s the real estate term that stands for money you earn from renting your home out for a day, week, or month at a time. If you’ve got a property with a stand-alone unit like a “granny flat” or ADU (additional dwelling unit), you could rent it for short periods of time. Other people might travel for part of the year, and rent their home out for the months that they’re gone. 

Any of these circumstances can qualify as short-term rental income. With the rise of businesses like VRBO, AirBnB, and HomeAway, you’ve got more opportunity than ever before to make money through short-term rental income. However, it didn’t always allow you to qualify for a mortgage refinance, because short-term rental services don’t offer a lease agreement.

How have rules and lenders changed their view of short-term rental income and mortgage refinancing?

Mortgage lenders are catching up with the short-term rental business, and the majority of them will now consider income from your vacation rental property when you’re applying for a mortgage refinance. This wasn’t always true: up until 2019, some lenders didn’t accept short term rental income to qualify for refinance loans because there wasn’t a lease agreement. Now that short-term rentals are more common, you can use several ways to prove you receive rental income from part of your property or part of the year for a single-family home.

AirBnB partnered with several major mortgage finance lenders in 2019 to allow hosts to use the income they get from a room in their house or a separate dwelling unit to apply for a mortgage refinance. VRBO, another platform, has also partnered with mortgage lenders to allow their records to document short-term rental income.

In the past, only traditional rental properties like separate investment homes, could be used as income to apply for mortgage refinancing, primarily because signed lease agreements were required.

 

Not every mortgage lender will accept short-term rental income as part of the qualification process for a 30-year fixed rate, 15-year fixed rate mortgage refinance, whether it’s a cash out refinance, a home equity line of credit (HELOC) or another type of refinanced mortgage loan. This is yet another reason why, if you use short-term rental income to pay all or part of your mortgage each month and are considering refinancing, you can benefit from working with an experienced mortgage professional.

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