11/18/2016 0 Comments A Brief Guide to VA Funding FeeAlthough VA home loans are an economical loan type for U.S. veterans, they involve a funding fee that veterans have to pay when they take a VA loan or refinance it. The amount of VA funding fee the applicant may have to bear depends on numerous factors that include the borrower’s service type, whether they have previously secured a VA loan, and more. Through this blog post, you’ll learn about the VA funding fee - primarily how much of funding fee you need to pay - based on your service type.
General Factors that Determine the Fee Depending on the loan amount, the VA funding fee may vary from 1.25 to 3.33 percent of the total loan amount. The amount is usually higher in case of refinancing. Other factors that determine the VA funding fee include:
As mentioned earlier in the blog, the VA funding fee is different for military personnel with different service types. Reservists and National Guard members pay slightly more VA funding fee than regular military members. Here’s a brief breakdown of the fee according to their service types. Regular Military Members
Reserve or National Guard Members
The above funding fee--both for regular and reserve members--is applicable if the applicant is securing the loan for the first time. If, however, they are taking the loan for the second time, they have to pay more funding fee. Who is Exempted? The VA allows certain veteran applicants to exempt the fee. These include:
Conclusion Regardless the VA loan amount, VA home loan applicants can choose to finance the VA funding fee with the loan amount, instead of paying it in cash. A VA approved lender can provide with more detailed information on these elements to help ensure your home-purchase journey remains hassle-free. In addition, a professional banking officer can always help you with more information on closings costs and if you qualify to exempt them.
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Before you say yes to your broker or even think of applying for a loan, it is important to understand your current financial status. As you will be paying a substantial amount of money towards loan installments, you must have a clear understanding of your budget and how much you can afford to pay. No matter the type of home and neighborhood you choose for your home, it is a bad deal if your mortgage payments eat up more than half of your income. This post discusses several factors that you must consider before investing in a new home. 1. The Amount you can Afford The debt-to-income ratio is there for a reason. Most lenders use debt-to-income ratio to measure the borrower's ability to manage monthly mortgage payments and repay debts. Different loan programs have different debt-to-income ratios as criteria to set borrower’s mortgage limit. Where the Federal Housing Administration (FHA) uses 43 percent debt-to-income ratio as a guideline for approving mortgages, USDA limits the ratio to 41 percent, provided the borrower has a credit score over 660 and stable employment. In short, all your cumulative expenses such as mortgage installments, property tax, and life insurance, among other household expenses, shouldn’t be equal to or more than the debt-to-income ratio required by different loan programs. 2. Daily Expenses Besides Debt Your expenses don’t come to a halt with the purchase of a home. You will realize that you now have other expenses added to your lists such as home decor, contemporary furniture pieces, and what not. In addition, you will be inviting friends over for house parties, take weekend getaways every month if not every week, or maybe hire a personal trainer. Though none of these are substantial expenses, they can be the driving factor behind delayed payments of obligations such as the electricity bills, if you have bought a home based on debt-to-income ratio alone. Before you commit to specific mortgage payments, it is wise to subtract the cost of your most expensive hobbies or any other leisure expenses and then decide whether the remaining amount supports your home buying decision. 3. Down Payment Per Se It makes sense to make 20 percent downpayment than paying private mortgage insurance (PMI). PMI is a risk-management tool that protects lenders against loss if a borrower defaults on the loan. A PMI may cost you $50 to $100 per month, sometimes less or even more. If you are not comfortable making a 20 percent down payment, you can pursue FHA and USDA loan program options. While FHA requires minimum 3.5 percent downpayment, USDA minimum downpayment requirement is just 2 percent. 4. The Right Time to Buy Home The best time to invest in a property or buy a home is off-season. If you are not sure about what you are going to do for next 10 years, or your stay at the current location, it is not the right time to buy a home. In addition, you can consult with your broker as to the time they think it wise to invest. Lastly, if you plan to stay for long, say more than 10 years, then no time is good or bad. Conclusion No doubt, affordability should be your number one criteria to decide whether you are ready to buy a home, and you should consider privileges associated with several loan programs for first time home buyers. There are several loan programs such as USDA rural development in Texas, that offer additional loan benefits to homebuyers planning to invest in a property in the rural areas. To learn more about the pros and cons of USDA loans or any other loan program, consult a loan specialist. A loan professional is well placed to guide you through the mortgage process, helping you identify your long term ability to repay the loan. |
AuthorDarrick encourages readers to post issues that need immediate attention in terms of home buying; such interactions will enhance reader engagement and provide a road-map for others Archives
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