October 5th, 2016 8:21 AM by Joan Rusco
A VA loan in Minnesota is, in our opinion, one of the best ways to finance your home. However, as we pointed out in a recent email to clients it may not be your best loan.
As stated in our client email (we hope you’ve signed up to get those) real estate professionals tell us many people, even those who claim to be moving to their dream home, will move every five to seven years. Are you among them? What does your home buying history tell you about your own behavior?
Checking today’s rates we note that a 5/1 or 7/1 adjustable rate can be a quarter point (.25% lower) than a 30 year fixed rate. What is a 5/1 or 7/1 mortgage? The first number is the number of years the rate on a mortgage is fixed. A 5/1 mortgage would have a fixed or initial rate for 5 years. It would then adjust to market conditions every year. A 7/1 would be fixed for 7 years then adjust annually after that for the next 23 years.
Comparing a Minnesota VA loan to these products requires several considerations. First, you should have a 20% downpayment for an adjustable rate mortgage otherwise you will have a monthly payment for mortgage insurance over and above your regular principal and interest payment. Second, you should compare rates to a standard VA loan to make sure it’s financially beneficial to have an adjustable rate. We always recommend talking to a professional financial advisor whether its your tax professional or investment advisor. If you’re able to put 20% down you would avoid paying the funding fee required on a VA loan in Minnesota and other upper midwest states. That fee is currently fixed at 2.15% on a no downpayment VA loan. For a $200,000 loan the funding fee (which can be added to the loan amount).
We still believe there are very strong advantages to using your VA benefit to purchase or refinance a home. Here at VALoansMN we can give you the numbers you need to make an informed decision on what works best for you. In previous posts we’ve gone over many details of the advantages of a VA loan. Please refer to earlier posts on our VALoansMN web site.
We write this to point out that while our expertise at VALoansMN is home loans for veterans using a Veterans Administration guaranteed loan we are also quite versed in all loan products. There are but a very few lenders who are adept in VA lending. Many claim otherwise, but trust us, it’s a special niche in home lending and we’re good at it.
We encourage all our clients to tell their veteran friends and families to consider a VA home loan now that rates might be at the very bottom. Don’t let a friend pass this opportunity by. We will be glad to give others the information needed to make a wise choice on this most important financial matter.