VA Home Loans - Win, win, and win? What are the cons? (PMI, interest rate)
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Background: bought my 1st home in 2007 in SA. Back then, conventional seemed way to go; easier requirements (low doc) and better interest rate. PMI wasn't an issue as I put 20% down.
Fast Forward 2012/2013: uber low interest rates, where I see at NFCU that the VA home loan is actually a fraction of a percent cheaper @ 3.260 over a conventional; 100% financing available for VA Home Loan (where I'm not even interested in putting 1% down); no PMI (upfront, annual, or otherwise) and zero funding fee for 10%+ disabled Vets.
For the gurus here: Is there a downside to VA Home Loan or is it win, win and win?
Last edited by BstYet2Be; 11-29-2012 at 05:16 PM..
Reason: moved from the San Antonio Forum
It should be a win, win. It is for the buyer. I had a house for sale and a man made an offer on it with VA financing. OK, no big deal for me as the seller. WRONG!!!! They did more inspections than I have ever seen in selling a property. They also had a VA appraiser do an inspection. The only problem was the appraiser said it needed $6000 in plumbing repairs. ??????? I asked for what plumbing repairs, I knew of no problems with the plumbing. The appraiser said to get a plumber and he will tell you what is wrong. That's like giving a plumber a check for $6000 and fix something.
As the seller, I would have had to pay for needed repairs to meet the appraisal. Needless to say, I did not do any repairs. The deal fell through.
I did sell the property later. No repairs were required by the FHA appraiser. VA is a great deal for the vet, but you need to buy a brand new perfect house with a warrenty.
That's my experience.
Interesting. So more aggressive on the inspections.
I can't remember what used to be the va buyer downfall, but I believe it was a higher interest rate when compared to conventional; this seems to no longer be the case. for me, the biggest advantage is 0 down. I know we're in 'recovery mode', but I'd rather have that capital elsewhere and more near term liquid, as well as an option to flush the toilet and start over, if needed.
Anyway, can't help but also think I'm missing a potential con (other than added difficulty to the seller, which nobody wants).
VA is fine as long as you have the disability claim so there's no funding fee. If you have to pay that funding fee, it's ridiculous and plays with your equity as you have to increase your loan amount to cover it, which means if you go to sell in a few years, are you going to have enough equity to not come to the table with cash? Many times, the VA has a "delayed down payment" to cover that funding fee.
In your case, you don't have the funding fee, so there are really no cons except you're not putting any skin in the game and some sellers don't like that. Sellers also have to pay for the termite report and if the house is on Septic or Well, the seller has to pay for those too. Sellers don't like to be told what they HAVE TO pay for.
VA is fine as long as you have the disability claim so there's no funding fee. If you have to pay that funding fee, it's ridiculous and plays with your equity as you have to increase your loan amount to cover it, which means if you go to sell in a few years, are you going to have enough equity to not come to the table with cash? Many times, the VA has a "delayed down payment" to cover that funding fee.
In your case, you don't have the funding fee, so there are really no cons except you're not putting any skin in the game and some sellers don't like that. Sellers also have to pay for the termite report and if the house is on Septic or Well, the seller has to pay for those too. Sellers don't like to be told what they HAVE TO pay for.
thanks for feedback. would you say the funding fee is worse than, better than or equal to FHA's UFMIP?
thanks for feedback. would you say the funding fee is worse than, better than or equal to FHA's UFMIP?
It depends on the price point. The VA funding fee is about (not exact) $4500 the first time you use it and goes up from there the next time. I just had a buyer pay $7700+ for his funding fee. OUCH!
In the lower price point, the FHA UFMIP is way less, but they also have to pay 3.5% down. They also have to pay Monthly MIP, but they aren't technically playing with their equity.
And VA rates through the Navy Federal have always been considerably less than the Conventional and FHA rates.
The cons are that if you're doing 100% financing, you don't have a ton of equity in the home until a long time after you've purchased. If you have to sell within 3-5 years you may not make anything and could lose money. A lot of the folks under water now are peop,e that went VA or FHA. it's a very good tool to get folks into a home for nothing down, but you need to evaluate your long terms plans.
The cons are that if you're doing 100% financing, you don't have a ton of equity in the home until a long time after you've purchased. If you have to sell within 3-5 years you may not make anything and could lose money. A lot of the folks under water now are peop,e that went VA or FHA. it's a very good tool to get folks into a home for nothing down, but you need to evaluate your long terms plans.
Actually, no. In the mortgage crisis, less than 10% of the foreclosures were VA loans (double checking that stat to see if it was regional or national), and second to the least, FHA. Why? You have always have had to qualify for these loans, and both have always had workout guidelines. (VA subsequently expanded their workout problem again in 2008). The folks that are under water either participated in NINA, neg am and 100% combo financings, all conventional loan products. It got so prevalent in the mortgagage market, even Fannie and Freddie got into the act with something called "Alt A" products. Sellers would not even entertain a VA or FHA loan in 2004 & 2005, so much so, FHA even lowered their appraisal guidelines, just to compete and salvage some of their staff.
VA has been remarkably consistent pre-crisis, during crisis and post-crisis (so far).
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