How Owning a Home Builds Your Net Worth

Owning a home is a major financial milestone and an achievement to take pride in. One major reason: the equity you build as a homeowner gives your net worth a big boost. And with high inflation right now, the link between owning your home and building your wealth is especially important.

If you’re looking to increase your financial security, here’s why now could be a good time to start on your journey toward homeownership.

Owning a Home Is a Key Ingredient for Financial Success

report from the National Association of Realtors (NAR) details several homeownership trends, including a significant gap in net worth between homeowners and rentersIt finds:

“. . . the net worth of a homeowner was about $300,000 while that of a renter’s was $8,000 in 2021.”

To put that into perspective, the average homeowner’s net worth is roughly 40 times that of a renter’s. This difference shows owning a home is a key step in achieving financial success.

Equity Gains Can Substantially Boost a Homeowner’s Net Worth

The net worth gap between owners and renters exists in large part because homeowners build equity. When you own a home, your equity grows as your home appreciates in value and you make your mortgage payments each month. As a renter, you don’t have that same opportunity. A recent article from CNET explains:

Homeownership is still considered one of the most reliable ways to build wealth. When you make monthly mortgage payments, you’re building equity in your home . . . When you rent, you aren’t investing in your financial future the same way you are when you’re paying off a mortgage.”

But on top of that, your home equity grows even more as your home appreciates in value over time. That has a major impact on the wealth you build, as a recent article from Bankrate notes:

“Building home equity can help you increase your wealth over time, . . . A home is one of the only assets that have the potential to appreciate in value as you pay it down.”

In other words, when you own your home, you have the advantage of your mortgage payment acting as a contribution to a forced savings account that grows in value as your home does. And when you sell, any equity you’ve built up comes back to you. As a renter, you’ll never see a return on the money you pay out in rent every month.

Bottom Line

Owning a home is an important part of building your net worth. If you’re ready to start on your journey to homeownership, let’s connect today.

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Planning To Retire? Your Equity Can Help You Reach Your Goal.

Whether you’ve just retired or you’re thinking about retirement, you may be considering your options and trying to picture a whole new stage of your life. And you’re not alone. Research from the Retirement Industry Trust Association (RITA) shows 10,000 Baby Boomers reach the typical retirement age (65) every day, and only 47% of the people in that generation have already retired.

If this sounds like you, one thing worth considering is whether or not your current home will suit your new lifestyle. If your home doesn’t have the features or benefits you’re looking for, the good news is, you may be in a better position to move than you realize.

That’s because, if you already own a home, you’ve likely built-up significant equity, and that can help you fuel your next move. According to the National Association of Realtors (NAR):

“A homeowner who purchased a typical home five years ago would have gained $125,300 from just price appreciation alone.”

In fact, over the last twelve months, CoreLogic reports the average homeowner in the United States gained roughly $64,000 in equity due to home price appreciation.

You can use your equity to help you achieve your homeownership goals. Whether you want to downsize, move closer to loved ones, or buy a home in a dream destination, your equity can help get you there. It may be some (if not all) of what you’d need as your down payment on a home that better fits your changing needs.

To find out how much equity to have in your home, reach out to a trusted real estate professional today.  

Bottom Line

Retirement is a big step and so is buying or selling a home. As you move into this new phase of life, let’s connect so you have an expert to guide you through the process as you sell your current home and give you expert advice as you buy one that’ll better suit your needs.


How Energy-Efficient Upgrades Can Increase Your Home’s Value

How Energy-Efficient Upgrades Can Increase Your Home’s Value

Energy-efficient upgrades can not only shrink your utility bill; they can increase the value of your home.

Homebuyers are becoming increasingly aware of the benefits of energy-efficient homes. In fact, they’re often willing to pay more for homes with “green” upgrades, says Sandra Adomatis, a specialist in green valuation with Adomatis Appraisal Service in Punta Gorda, Florida.

Just how much your home will increase in value depends on a number of factors, Adomatis says, like where you live, which upgrades you’ve made and how your home is marketed at sale time. The length of time to recoup the costs of green upgrades also depends on the energy costs in your area.

In 2014, upgraded homes in Los Angeles County saw a 6 percent increase in value, according to a study from Build It Green, a nonprofit based in Oakland, California, that works with home professionals. Upgraded homes in Washington, D.C., saw a 2 to 5 percent increase in 2015, according to a study Adomatis authored.

While upgrades like a gleaming new kitchen or a finished basement may give you more bang for your buck than energy-saving features, going green has its benefits. Here’s where you can begin.

Find out how much energy your home uses

Getting a quick energy assessment or a more thorough energy audit can determine how much energy your home uses, as well as which upgrades would make the most sense for your home and your finances. An audit may include an energy rating, a number that indicates how energy-efficient your home is and how much it will increase if you make recommended upgrades.

The Department of Energy website lists ways to find assessors in your area. The Environmental Protection Agency’s Energy Star program offers assessor and advisory services to help you determine what to upgrade. Your utility provider may also offer energy audits.

The cost varies depending on location and who’s providing the service. Your utility company may offer an assessment for free or at a discount. A full audit may run $300 to $500 depending on the complexity, according to Don Knapp, senior marketing manager with Build It Green. You may not want to foot the bill for a full audit unless you’re planning to take advantage of it with major upgrades.

Once you know where you can improve your energy use, begin by making the changes that are most affordable and have a quicker payoff, Adomatis advises. Then consider whether the costlier ones are worth the investment. Keep in mind that a variety of tax credits and financing options are available for energy-efficient improvements.

Here are some common energy upgrades, from least expensive to most.

1. Insulation. A 2016 Cost vs. Value report from Remodeling magazine found that the average attic air-seal and fiberglass insulation job costs $1,268, with an added value to the home at resale within a year of completion of $1,482. That amounts to a 116 percent return on investment. And according to Energy Star, homeowners can save $200 a year in heating and cooling costs by making air sealing and insulation improvements

2. Appliances. Your appliances account for about 15 percent of your home’s energy consumption, the DOE says. Certified clothes dryers can save you $245 over the life of the machine, according to Energy Star. A certified dryer from General Electric can run from $649 to $1,399.

When upgrading, look at the kilowatt-hour usage of a new appliance and compare it to your current one — a good Energy Star rating doesn’t necessarily mean it will use less energy than your existing appliance, Adomatis says.

3. Heating and cooling systems. These systems account for about 43 percent of your energy bill, according to the DOE. Replacement costs for an entire HVAC system — heating, ventilation and air conditioning — vary widely depending on equipment brands and sizing, but may run several thousand dollars. Energy Star estimates that you can save 30% on cooling costs by replacing your central air conditioning unit if it’s more than 12 years old.

While addressing your home’s heating and cooling systems, bear in the mind that leaky duct systems can be the biggest wasters of energy in your home, according to Charley Cormany, executive director of Efficiency First California, a nonprofit trade organization that represents energy-efficient contractors. The cost of a professional duct test typically runs $325 to $350 in California, he says.

4. Windows. Replacing the windows in your home may cost $8,000 to $24,000, and could take decades to pay off, according to Consumer Reports. You can recoup some of that in resale value and energy savings. Remodeling’s Cost vs. Value report found that installing 10 vinyl replacement windows, at a cost of $14,725, can add $10,794 in resale value. Energy Star estimates that certified windows, doors and skylights can reduce your energy bill by up to 15 percent. If you’ve already tightened the shell of your home, installing a set of new windows may not be worth the cost. But the upgrade may be worth considering if you live in a colder climate.

5. Solar panels. EnergySage, a company offering an online marketplace for purchasing and installing solar panels, says the average cost of a solar panel system is $12,500. The payoff time and the amount you’ll save will vary depending on where you live. Estimated savings over a 20-year period in Philadelphia, for example, amount to $17,985, while it’s more than twice that amount in Seattle: $39,452, according to EnergySage.

Last: Let Buyers Know

When it comes time to sell, your real estate agent can help you market your home as energy efficient. Provide your agent with utility bills or your energy rating, if you received one with your audit, to include when describing the house on a multiple listing service, or MLS.

There’s a growing trend in the real estate industry to make energy upgrades visible, Knapp says; energy disclosures are now a common practice in cities like Berkeley, California, and Chicago. “If it’s reflected on the MLS,” Knapp says, “it’s more likely to be reflected in the resale value.”

Bottom line: If you weigh the costs and savings carefully, going green can be worth the investment.


The article How Energy-Efficient Upgrades Can Increase Your Home’s Value originally appeared on NerdWallet.


2022 Housing Market Forecast


Three Tips for First-Time Homebuyers

Buying your first home is a major decision and an exciting milestone. Even though it can feel daunting at times, it has the power to change your life for the better. If you’re looking to purchase your first home, you may be wondering what’s happening in the housing market today, how much you need to save, and where to start.

Here are three things that can help give you the information you need to confidently pursue your dream of homeownership.

1. Consider All Options When the Number of Homes for Sale Is Low

Today, there are far more buyers in the market than there are homes available for sale. When that happens, it’s a good idea to do what you can to increase your pool of options. That could mean expanding your search to include additional housing types. For first-time buyers, considering condominiums (condos) and townhomes can be an excellent way to increase your choices. According to Bankrate:

“Townhomes often cost less than single-family homes of a similar size in the same location.”

In another article, Bankrate also says:

“Buying a condo can be a great way to dive into homeownership without worrying about the upkeep that comes with single-family homes and townhouses.”

Condos and townhomes are both great entryways into homeownership. When you buy either one, you can start building equity which increases your net worth and can fuel a future move.

2. Know Your Down Payment Could Be More Within Reach Than You Think

Saving for a down payment can feel like one of the biggest obstacles for homebuyers, but that doesn’t have to be the case. As the National Association of Realtors (NAR) says:

One of the biggest misconceptions among housing consumers is what the typical down payment is and what amount is needed to enter homeownership.”

Data from NAR shows the median down payment hasn’t been over 20% since 2005. The graph below breaks down the median down payment by age group for recent homebuyers according to the 2022 Home Buyers and Sellers Generational Trends Report from NAR (see graph below):

Three Tips for First-Time Homebuyers | Simplifying The Market

Based on the data above, the median down payment for all homebuyers is only 13%. That’s well below the common misconception of 20%, and it’s even lower for younger buyers. This could mean you may not need to save as much for a down payment as you initially thought.

There are also down payment assistance programs available for many buyers. Not to mention, some loan options require as little as 3.5% (or even 0%) down for buyers who qualify. While there are advantages to putting 20% down, especially in today’s competitive market, know that you have options.  To get more information on how much you may need to save and the help that’s available, talk with a professional.

3. Work with a Trusted Real Estate Advisor Throughout the Process

Finally, no matter where you’re at in your homeownership journey, the best way to make sure you’re set up for success is to work with a real estate professional.

If you’re just starting out, they can help you with the initial steps, like educating you on the process and connecting you with a trusted lender to get pre-approved. Once you’re ready to begin your search, a real estate professional can help you understand your local market and search for available homes. And when it’s time to make an offer, they’ll be an expert advisor and negotiator to help your offer stand out above the rest.

Bottom Line

Knowledge is key to succeeding on your homebuying journey. Knowing market trends, what you need for a down payment, and what options you have as a buyer today can give you the confidence you need to buy a home. Let’s connect so you have an expert on your side who can help you navigate the homebuying process.


What You Need To Know About Selling in a Sellers’ Market

Even if you haven’t been following real estate news, you’ve likely heard about the current sellers’ market. That’s because there’s a lot of talk about how strong market conditions are for people who want to sell their houses. But if you’re thinking about listing your house, you probably want to know: what does being in a sellers’ market really mean?

What Is a Sellers’ Market?

The latest Existing Home Sales Report from the National Association of Realtors (NAR) shows housing supply is still very low. There’s a 2-month supply of homes at the current sales pace.

Historically, a 6-month supply is necessary for a normal or neutral market where there are enough homes available for active buyers. That puts today deep in sellers’ market territory (see graph below):

What You Need To Know About Selling in a Sellers' Market | MyKCM

What Does This Mean for You When You Sell?

When the supply of houses for sale is as low as it is right now, it’s much harder for buyers to find homes to purchase. That creates increased competition among purchasers which can lead to more bidding wars. And if buyers know they may be entering a bidding war, they’re going to do their best to submit a very attractive offer upfront. This could drive the final price of your house up.

And because mortgage rates and home prices are climbing, serious buyers are motivated to make their purchase soon, before those two things rise further. That means, if you put your house on the market while supply is still low, it will likely get a lot of attention from competitive buyers.

Bottom Line

The current real estate market has incredible opportunities for homeowners looking to make a move. Listing your house this season means you’ll be in front of serious buyers who are ready to buy. Let’s connect so you can jumpstart the selling process.


Things That Could Help You Win a Bidding War on a Home Purchase

With a limited number of homes for sale today and so many buyers looking to make a purchase before mortgage rates rise further, bidding wars are common. According to the latest report from the National Association of Realtors (NAR), nationwide, homes are getting an average of 4.8 offers per sale. Here’s a look at how that breaks down state-by-state (see map below):

Things That Could Help You Win a Bidding War on a Home | MyKCM

The same report from NAR shows the average buyer made two offers before getting their third offer accepted. In this type of competitive housing market, it’s important to know what levers you can pull to help you beat the competition. While a real estate professional is your ultimate guide to presenting a strong offer, here are a few things you could consider.

Offering over Asking Price

When you think of sweetening the deal for sellers, the first thought you likely have is around the price of the home. In today’s housing market, it’s true more homes are selling for over asking price because there are more buyers than there are homes for sale. You just want to make sure your offer is still within your budget and realistic for the market value in your area – that’s where a local real estate professional can help you through the process. Bankrate says:

Simply put, being willing to pay more money than other buyers is one of the best ways to get your offer accepted. You may not have to increase it by a lot — it’ll depend on the area and other factors — so look to your real estate agent for guidance.”

Putting Down a Bigger Earnest Money Deposit

You could also consider putting down a larger deposit up front. An earnest money deposit is a check you write to go along with your offer. If your offer is accepted, this deposit is credited toward your home purchase. NerdWallet explains how it works:

A typical earnest money deposit is 1% to 2% of the home’s purchase price, but the amount varies by location. A higher earnest money deposit may catch a seller’s attention in a hot housing market.”

That’s because it shows the seller you’re seriously interested in their house and have already set aside money that you’re ready to put toward the purchase. Talk to a professional to see if this is something you can do in your area. 

Making a Higher Down Payment 

Another option is increasing how much of a down payment you’re going to make. The benefit of a higher down payment is you won’t have to finance as much. This helps the seller feel like there’s less risk of the deal or the financing falling through. And if other buyers put less down, it could be what helps your offer stand out from the crowd.

Non-Financial Options To Make a Strong Offer

Realtor.com points out that while increasing these financial portions of the deal can help, they’re not your only options:

. . . Price is not the only factor sellers weigh when they look at offers. The buyer’s terms and contingencies are also taken into account, as well as pre-approval letters, appraisal requirements, and the closing time the buyer is asking for.”

When it’s time to make an offer, partner with a trusted professional. They have insight into what sellers are looking for in your local market and can give you expert advice on what levers you may or may not want to pull when it’s time to write an offer.

From a non-financial perspective, this can include things like flexible move-in dates or minimal contingencies (conditions you set that the seller must meet for the purchase to be finalized). For example, you could make an offer that’s not contingent on the sale of your current home. Just remember, there are certain contingencies you don’t want to forego, like your home inspection. Ultimately, the options you have can vary state-to-state, so it’s best to lean on an expert real estate professional for guidance.

Bottom Line

In today’s hot housing market, you need a partner who can serve as your guide, especially when it comes to making a strong offer. Let’s connect so you have a trusted resource and coach on how to make the strongest offer possible for your specific situation.


Today’s Home Price Appreciation Is Great News for Existing Homeowners

If you’re planning to sell your home this season, rising prices are great news for you. But it’s important to understand why prices are rising to begin with. One major factor is supply and demand.

In any industry, when there are more buyers for an item than there are of that item available, prices naturally rise. In those situations, buyers are willing to pay more to get the product or service they’re looking for when options are scarce. And that’s exactly what’s happening in the current real estate market.

Selma Hepp, Executive, Research & Insights and Deputy Chief Economist at CoreLogic, puts it like this:

With so few homes, buyers are once again left with fierce competition that’s driving the share of homes that sold over the listing price up to 66% . . . With the continued imbalance between supply and demand, home prices are likely to have another year of strong gains and are expected to average about 10% growth for the year.”

Because it will take some time for housing supply to increase, experts believe prices will continue rising. The latest Home Price Expectations Survey forecasts what will happen with home prices over the next 5 years. As the graph below shows, while the rate of appreciation will moderate over the next few years, prices will continue rising through 2026:

Today’s Home Price Appreciation Is Great News for Existing Homeowners | Simplifying The Market

What This Means When You Sell Your House

If you’re a homeowner, the projection for continued price appreciation this year opens up an opportunity to move. That’s because it may give your equity a major boost. Equity is the difference between what you owe on your house and its market value. The amount of equity you have increases as you make your monthly payments and as rising home prices drive up the market value for your home.

Growing equity is a powerful tool for homeowners. When you sell your house, the equity you’ve built comes back to you in the sale. That money could be enough to cover some (if not all) of your down payment on your next home.

Of course, if you want to know how much equity you have in your current house, it’s crucial to work with a real estate professional. They follow current market trends and can help you understand your home’s value when you’re ready to sell.

What This Means for Your Next Purchase

But today’s rising home values aren’t just good news if you’re ready to sell. Because price appreciation is forecast to continue in the years ahead, you can rest assured your next home will be an investment that should grow in value with time. That’s one of several reasons why real estate has been rated the best investment in a recent Gallup poll.

Bottom Line

If you’re weighing whether or not you should sell your house this season, know rising home values may be opening up an opportunity to use equity to fuel your move. Let’s connect so you can find out how much your home is worth and to learn more about all the benefits you have in today’s market.


Eliminate FHA Mortgage Insurance

removing fha mip

The mortgage insurance premium can add almost $225 monthly to the payment on a $265,000 FHA mortgage.  The decision to get an FHA loan may have been the lower down payment requirement or the lower credit score levels, but now that you have the loan, it is possible to eliminate it?

The mortgage insurance premium protects lenders in case of a borrower’s default and is required on FHA loans.  The Up-Front MIP is currently 1.75% of the base loan amount and paid at the time of closing, or financed into the loan amount.  The annual MIP (paid monthly) for loans with greater than 95% loan-to-value is .85% per year. 

For loans with FHA case numbers assigned before June 3, 2013, once the loan is paid down to 78% of the original loan amount, the MIP can be cancelled.  The borrower will need to contact the current servicer for the specific requirements.

However, for loans greater than 90% with FHA case numbers assigned on or after that date, the MIP is required for the term of the loan.

Most homeowners with FHA mortgages are not eligible to cancel the MIP because they either originated their loan after June 3, 2013, put less than 10% down payment and/or got a 30-year loan.  If they have at least 20% equity in the home, they can refinance the home with an 80% conventional loan which in most cases, does not require mortgage insurance.

With normal amortization on a 30-year loan, it takes approximately 11-years to reduce the original loan to the 78-80% requirement based on normal amortization.  There is another dynamic involved which is the appreciation on the home.  As the home goes up in value and the unpaid balance goes down, the equity increases. Further, one extra principal and interest payment annually will reduce a 30 year mortgage to 22 years.

If you believe that you have enough equity that would eliminate the need for mortgage insurance, I can investigate refinancing with a conventional loan.  Borrowers refinancing will incur expenses in starting a new mortgage and the interest rate may be higher than the existing rate. But, a lower MI payment or the elimination of the MI/MIP could significantly lower your monthly mortgage payments.

 

 

 


When Veterans Should (and Shouldn’t) Use a VA Home Loan

Happy New Year 2019

If you’re a veteran who’s thinking of purchasing a home or refinancing the home you have, you may want to consider a VA loan instead of conventional financing. This government loan program was created to help members of the armed forces, veterans, and eligible surviving spouses become homeowners.

VA loans come with plenty of perks. According to the U.S. Department of Veterans Affairs, VA loans used to purchase a property come with competitive interest rates and don’t require a down payment or private mortgage insurance (PMI). Cash-out refinance loans come with equally generous terms, except they let you take out cash to pay down debt or fund other financial goals.

Another popular VA loan program, the Interest Rate Reduction Refinance Loan (or IRRRL, also called the Streamline Refinance Loan), lets you refinance your current VA loan to a new loan with a lower interest rate with no appraisal or credit underwriting. There are also special VA loans for Native American veterans and disabled vets.

At the end of the day, all VA loans offer special terms to veterans, and may be more affordable than other options.

When You Should (and Shouldn’t) Use a VA Loan

To qualify for a VA loan, your length of service or service commitment, duty status, and character of service are considered. Once you determine that you’re eligible, it’s up to you to decide whether to work with the VA or pursue traditional financing for your home or refinance.

Unfortunately, this is where things get tricky, since not all realtors or even mortgage brokers work with VA loans enough to understand them. David Skogland, a realtor from Minnesota, says that he has seen real estate agents talk eligible buyers out of using a VA loan when doing so would have been in their best interest.

“They tell veterans that sellers will not accept their offer because the seller is expected to pay everything,” she said. “There are a couple of things that veterans can’t pay for, and there are so many ways to write an offer to take care of a seller and make the transaction fair and more than equitable.”

While real estate agents may be unnecessarily wary of working with buyers using this option, some loan originators may have their own reasons for steering consumers away from VA loans as well. We reached out to experts to find out when a veteran should — and shouldn’t — consider a VA loan. Here’s what they said:

When a Veteran ShouldUse a VA Loan

Before we dive in, let’s go back over the benefits of VA loans. One of the biggest is the fact that borrowers don’t have to have a down payment, nor do they have to pay private mortgage insurance (PMI). Since PMI can cost around 1% of the mortgage amount every year, not paying for this coverage can easily save you hundreds of dollars per month.

“VA loans are also more forgiving for people who have had some credit missteps in the past,”  says Owen Riess, a VA Home Loan specialist at cambria Mortgage. “The waiting period for a previous bankruptcy or foreclosure is much shorter for a VA loan.”

With these benefits in mind, here are some of the instances where an eligible consumer should absolutely consider a VA loan:

  • You don’t have a down payment:“If a veteran is purchasing a home and doesn’t have the traditional down payment available to them, the VA loan will allow you to purchase with no down payment,” says Riess. This could help a buyer get into a home they couldn’t buy otherwise, which can help them start building equity faster.
  • You don’t want to pay PMI: The single most important benefit to a VA loan is that a veteran can purchase the home at 100% financing with no private mortgage insurance, said Partak. “Not only is private mortgage insurance incredibly expensive to set up, it also adds hundreds of dollars to the monthly payment.” Keep in mind, however, that VA loans usually come with an upfront funding fee between 1.25% and 3.3% of the loan amount based on your loan details and level of service.
  • You have credit issues. VA Home Loans are more forgiving if you’ve made some credit mistakes in the past. Generally speaking, you need a credit score of around 620 to qualify.
  • You want low closing costs. The closing costs on VA loans tend to be lower than those on conventional financing, partly because some of them are regulated. Also, the seller can credit back up to 4% of your loan back to you to cover closing costs.
  • You want to refinance to secure a lower interest rate. If you have a VA loan already but could qualify for a lower interest rate, it almost always makes sense to use an Interest Rate Reduction Refinance Loan (IRRRL).These loans don’t require an appraisal or credit underwriting, and the closing costs can be wrapped into the loan.
  • You’re a disabled veteran. Disabled veterans receiving compensation for a service-connected disability are often much better off with a VA loan compared to traditional financing, because they’re exempt from having to pay the upfront funding fee.

In short, a VA loan is good for most eligible borrowers since costs are low, PMI is not required, and credit score requirements may be more manageable for borrowers who’ve had credit mishaps in the past. For that reason, almost any veteran who can qualify would be better off with a VA loan provided the property they want to buy is eligible.

When It Doesn’t Make Sense to Use a VA Loan

Still, the experts we spoke to said there are some scenarios where a VA loan would be less advantageous than traditional financing. You may want to pursue a conventional mortgage if:

  • You’re using a VA loan for the second time: Because the VA funding fee is based on several factors, including whether you’ve had a VA home loan in the past, it can make sense to go with traditional financing for a second property purchase. Riess says that, if the veteran does not have a VA disability and has used a VA loan in the past, there will be a 3.3 percent funding fee from the VA. “This may offset any of the benefits of using a VA loan and may make a conventional loan more attractive.”
  • You’re buying an investment property. Riess notes that VA loans cannot be used for investment properties or second homes.
  • You’re buying a property that isn’t eligible for a VA loan. Not all properties are eligible for VA loans, although all single-family homes are or should be eligible, notes Riess. “Some condos will not allow them because they are similar to FHA loans in that they need a special VA approval,” he said. “If they aren’t on VA approval list, a lender can request or get them to be, but this is a challenging process and one that takes a lot of time.”
  • You have a 20% down payment. If your down payment is big enough to avoid paying PMI already, you should definitely compare rates and terms on both VA loans and conventional home loans. That’s because the upfront funding fee for VA loans could make the loan more expensive overall.
  • The home you want to buy is too expensive. VA loans come with limits that can make it difficult for veterans to buy in expensive real estate markets. These limits are determined by the county you live in and vary widely. The loan limit for a single-family home in all counties of Alabama, for example, is $453,100, while the limit for single families in every county of Alaska is $679,650.

The Bottom Line

At the end of the day, most borrowers eligible for a VA loan would be smart to consider it. With more lenient credit requirements, low interest rates, and no down payment requirement or PMI, what’s not to like?

But as you move through the mortgage process and start comparing your options, experts say you should make sure you’re speaking to someone who has a wide breadth of experience with VA loans. This is important because not all loan officers have experience with all types of funding.

Riess, who is a military veteran himself, says that both his loan originator and realtor advised him to use a VA Home Loan when he purchased a home as a young Marine Sergeant.

“In retrospect, I know that was good advice,” he said. “VA Home Loans have gotten a bad rap over the years, mainly because people don’t understand the process.  In reality, it’s no more difficult than a conventional or FHA loan, and often times it can be easier.”

Consider all the costs, interest rates, and the monthly payment for all your loan options, says Riess. “You should also take into consideration your short- and long-term plans,” he says.

By crunching the numbers and working with professionals who are knowledgeable about VA Home Loans, you can figure out which path to choose.

Original content by renowned author: Holly Johnson