It’s a long and winding road we travel to get to this new year. Many are saying adios, good-bye, sayonara and finally, get lost 2020. But there’s another and much brighter side to the year just passed.
First among the bright spots of 2020 is the medical technological miracle resulting in the development of a vaccine against Covid 19. Think about this: historically the optimistic predictions on creating anti-viral vaccines say it would take years. The vaccines now becoming available to tame this Covid pandemic took just months. That’s life affirming!
Secondly, and a major focus of our attention, is what has happened to V.A. mortgage rates. At VALoansMN we were offering record breaking loan rates in the upper 3 per cent range at the beginning of 2020. Today, thanks to an accommodating Federal Reserve which apparently is willing to keep the money presses churning, rates are a full percentage point below what they were just one year ago. This is economically reaffirming which allows us to maintain, perhaps even raise, our standards of living.
Given these two developments does 2020 seem all that bad? We at VALoansMN think not. Sure, that long and winding road through the past year had some pot holes. That’s true especially for our veteran brothers and sisters who were not fortunate enough to see their paychecks still coming despite government’s economic shutdowns. Those of us able to maintain our jobs during the hit and miss lockdowns should be most grateful and, at the same time, we suggest, should be most helpful to those who have suffered. We are among those with a deep sense of gratitude.
The road we travel now leads us to the new year. We look forward to continuing our service to those who have served and those serving today in our armed forces. We begin our year together with this Irish prayer:
May the road rise up to meet you.
May the wind be always at your back.
May the sun shine warm upon your face;
the rains fall soft upon your fields and until we meet again,
may God hold you in the palm of His hand
The roaring economy steamrolled into America a few years back as some of the know-it-all poo-bahs were predicting yet another recession. Even a few months ago the “experts” said we’re in for a recession. This may be 2020 but we can assure you the vision of the pundit class is not 20/20.
Jobs, jobs, jobs and, better for us, low rates, low rates, low rates! Veterans wanting to buy or refinance homes have hit a sweet spot in the market place. A decade ago rates had dropped to 5 percent and the rush to refinance was on. Now those same mortgages can be refinanced at incredible (and hassle free) savings. That’s one of the several outstanding features of your V.A. loan, it can be refinanced with only a fraction of the documentation of other mortgages.
Readers of our blog have noticed time and again we’ve urged Veterans to take advantage of our historic low interest rates. Despite the roaring economy we’re not seeing inflation to match as has been the case in the past. Usually when an economy is on fire the blaze gets out of hand and starts burning up the benefits with higher prices and higher interest rates. That is not happening now. You can still call us at VALoansMN, talk to Brad about your current mortgage and chances are we can save you thousands even if your mortgage is but a few years old.
There was a time not to many years ago when homeowners would make extra effort to pay off the mortgage. Why pay all that interest if you have the ability to pay down the principal? In today’s economy that may not make sense. Before we pursue this line of thinking we want to be very clear; you should always turn to professional financial advisors when it comes to your money and investing. We are not CPAs or Certified Financial Planners and you should check with that professional class when considering your own situation. But sometimes the facts are as plain as the nose on your face.
Here’s the scenario. Veterans Mary and John have a $200,000 V.A. loan at 3.75% on their home. They also have sufficient income to make more than the minimum monthly payment on this 30 year loan. But they’re also saving for future needs such as education for the kids or their own retirement. Their financial advisor has placed their savings in funds that give them an annual return of 6% or better. The question before them is should they pay down their mortgage with a 3.75% rate or take that extra cash and invest it in their savings which is giving them 6% (or more)? What would you do?
With the economy roaring into the new decade it may be time for you to take advantage of what we offer at VALoansMN. Call Brad at 612-240-9922 and see how you may be able to take advantage of this economic sweet spot with low loan rates.
It’s time to set the record straight. We’ve been receiving calls concerning a report on a local tv station that implied the Veterans Administration may be withholding some refunds due to those who’ve taken out a VA mortgage loan. We’re going to drive a truck through some of the holes left in that report.
First, some background on a VA loan. As we’ve written on these pages there is never a monthly mortgage insurance payment on a VA loan, even when you borrow 100% of your home’s value. A VA loan is only mortgage product with that feature. If you borrow more than 80% of your home’s value using a conventional or FHA loan you’re going to pay a monthly mortgage insurance premium (sometimes referred to as P.M.I.). But, as the old cliche goes, there is no free lunch.
Instead of a monthly insurance premium the V.A. charges a one-time, upfront funding fee. This can be rolled into the loan so there’s no out of pocket expense as you acquire the loan. The amount of the funding fee depends on whether or not you borrow 100% of the home value or you’re putting some money down. It also depends whether or not you’ve used your VA mortgage benefit before. If it’s your first time and you’re borrowing 100% of the home’s value you’ll pay 2.15% of the loan amount for regular military. It’s slightly higher for those in the Reserves or National Guard. If you’ve used your benefit before the funding fee increases to 3.3%. These fees are reduced if you’re putting some money down. Call Brad at 612-240-9922 for further details on the fee amounts. As indicated above, and by details we’ve just disclosed, you can see there is no free lunch. But we think this fee is better than a monthly mortgage insurance premium which can add considerably to your monthly payment.
There’s a major factor in this funding fee that cannot be overlooked. If you have any degree of disability declared as a result of your military service you are completely exempt from the funding fee. This is where we return to that tv report mentioned above.
Fair minded viewers were left with the impression the VA was withholding refunds due to disabled veterans who qualified for the funding fee exemption yet had paid that fee. Close examination of the report showed they did not name a single reliable source in that report. They implied disabled veterans are not getting the refunds they deserve. We suspect any missing refund is simply the result of lack of personal to process the payments. In this spirit we want to be perfectly clear about the process at VALoansMN; when you apply for a loan we’re going to ask you whether or not you have any degree of military related disability. If the answer is yes, we’re going to include that in your application which will exempt you from paying the funding fee. The veterans we serve are not going to be in a position of having to wait for any refund because our veterans will not be charged that fee in the first place.
Regular readers of our posts might recall a year ago we recounted the experience of a team member whose birthday is March fourth. A retired army captain told him “it’s the only command date on the calendar”. Perplexed he thought about that strange assertion until the next encounter with that Captain. “What did you mean by that” he asked. The Captain replied “think about it, when you tell a military person to march forth, what are you saying?
Each year our team member looks at his birthday as a time to “march forth in life, look to the future as a new beginning, a time for change, it's a new year. Is this month your month to ‘march forth’? Perhaps you’ve long thought about making a move to a new house, a different location, something that works better for your ever-changing life. We at VALoansMN may be just the right ticket for your future.
We are happy to report again that VA loan rates have inched up only slightly from a year ago. Our previous posts on these pages have gone into more detail on that topic so no need to belabor it here but, just know that VA backed home loans remain at very attractive and affordable rates. Historically we remain in a very sweet spot.
There are tv commercials from some of the national operations explaining how you don’t have to pay up to move up, that you can finance 100% of the home costs using the veteran benefit you have earned. You already know most of that. What sets us apart is we’re part of your home town, we’re local, we serve neighbors just the same as you would expect. We’re not a big national outfit although we’re approved to lend in the upper midwest states, down in Florida and, most recently, out in Arizona. But we’re here to serve locally. Turns out some of our neighbors are now in a position to move out of the colder winter weather to sunnier places although many maintain their homes here to return in the spring. We’ve expanded just enough to help you wherever you choose to go.
So, this year, if you choose to ‘march forth’ keep VALoansMN in mind. Let us help you move forward using the great benefit of a VA guaranteed home loan.
Interesting scenario arose with a realtor friend of mine. His client is selling his VA mortgaged home and wants to be able to buy another one of the same day. Can it be done? The short answer: yes.
To renew VA loan eligibility you must pay off your existing loan before getting the new one. My realtor friend wisely chose the same title company to do both the closing on his home sale and home purchase. That way every part of the transaction is handled at one desk. Otherwise the client would have to wait for the title company closing the sale of his/her home to wire the funds to another title company closing on the purchase of the new home. This eliminates the possibility of the purchase being delayed because the bank wire time deadlines have passed between transactions.
Let’s revisit another very important aspect of using a VALoansMN mortgage. As we’ve outlined in previous posts a VA loan is assumable. This means if your home financed with a VA loan is sold to another veteran that veteran, after meeting lending qualifications, can assume the balance left on your mortgage. This can be very attractive to a home buyer when interest rates are rising. Especially true now given our VALoanMN rates are extremely low. If you’ve purchased your home in the last couple of years with rates in the 4% (or lower) range and you want to sell the home in another 5, 6 or 7 years you would still have a sizable principal balance on the loan. Where do you think mortgage rates will be in a few years? Will they be higher or lower?
Let’s dig a little deeper on this ‘lending qualifications’ issue we raised above. Any veteran buyer of a home has to meet certain qualifications. This typically means meeting credit, debt, income and other requirements to show a lender you’re a safe bet. In addition there are a handful of lenders and servicers who do not allow their loans to be assumed. Talk to us at VALoansMN about this during your loan application process. We’ll set the record straight for you.
One of the most frequently asked questions about have a VA loan has to do with the ability to sell the home. There are no restrictions on selling your VA mortgaged home. A veteran or active duty person can sell their home to any potential buyer and can accept any kind of financing.
Yes, there are stricter guidelines on VA loans but those are in place to protect veterans. We harp on the benefits because we truly believe our loan program is the best program available. Call us at VA Loans MN so we can tell you our story.
You may not want the lowest mortgage rate available. We know that’s a bold statement for a VA mortgage blog to make but it’s true and we’re going to explain.
There’s more to a mortgage than rate. A lender can also charge an origination fee. Let’s look an example to illustrate what impact this can have on your home purchase or refinance using a VA loan.
Lender A offers a VA mortgage rate of 3.875% and they charge 1.5 points to originate that loan. The monthly payment on a $200,000 loan would be about $940. Lender B offers a rate of 4.125% on the same loan with an origination fee of ¼ point. Monthly payment would be $969. So you’d be better off with lender A right? Not necessarily. Let’s look at the real numbers in our example.
If you go with lender A you’re going to pay $3,000 in origination fees to get that lower rate. Lender B with the higher rate only charges $500 in origination fees. To get that lower mortgage rate you’re going to pay an additional $2,500! It would take you over 7 years to break even! Do you still want that lower mortgage rate?
Of course the VA restricts the amount of fees a borrower can pay so as a home buyer you may turn to the seller to help pay fees. Sometimes that works although a seller is also looking at their bottom line and they’re probably going to take the offer that costs them the least.
As you shop for a VA loan look beyond the rate. It’s a complicated business and that’s why we do what we do. We help veterans sort through the real cost of a VA mortgage. VALoansMN will be your go-to-guy to help you make the best deal possible on your next purchase or refinance. Pick up a phone and call us today 612-240-9922. Brad is waiting for your call.
What’s happening with VA mortgage rates here in Minnesota or in Wisconsin and the Dakotas reminds us of what we see in a summer weather forecast. VA mortgage rates are definitely in a “low pressure zone”. Given last months vote by Brits to exit the European Union we watched the bond market. As we at VALoansMN have written on these pages before if you want to see what’s happening with VA mortgage rates watch the bond market. The U.S. bond market has been on fire. By that we mean prices have been going up. Investors who own bonds have seen prices increase and when prices increase it’s because the rates are declining. Rates always decrease when prices increase. We at VALoansMN watch the 10-year bond because that instrument is a major player in mortgage rates. Soon after the British vote to leave the yield on the 10 year treasury dropped to it’s lowest level since the summer of 2012. They climbed back up a little but as of this writing the yield on the ten year treasury is down almost three quarters of a point! That’s why there is very little pressure for VA loan rates to increase. In fact, there’s more downward pressure than a likelihood of an increase.So what rate are you likely to get on your VA mortgage? The short answer is a very, very low rate. Of course there are lots of factors that influence your mortgage rate. There’s your credit score, your history of borrowing and about 3 dozen other factors. There is no one rate for all veterans seeking to buy or refinance a home. But generally speaking, this summer rates remain extremely low. These low rates give you a lot of buying power when you go into the real estate market. Let us pre-approve you for a VA loan so when you and your realtor find that new family home you go to the bargaining table (actually your realtor will likely be the one at the table) with a lot of power.So bring on those summer low pressure systems that tend to float in and out of our area and just know that right now there is very low pressure on VA mortgage rates to make a move upward. It remains a great time to buy a house or refinance your existing mortgage. Remember you need no money down when using your VA mortgage benefit!
The first big advantage of a VALoansMN mortgage is the savings. The Veteran’s Administration puts limits on the cost of your mortgage. These are very strict limits so you know when you get your loan from VALoansMN it is the very lowest cost available on the market today. This is only the beginning. The next advantage is huge, especially in today’s economy.
You can finance up to 100% of your home’s appraised value. In other words, there is no down payment when you purchase your home (or refinance an existing mortgage) with a loan from VALoansMN. We've mentioned this is an especially huge advantage today. Here’s why: given today’s very low mortgage interest rates it may be better to borrow more on your home and take extra monthly income and invest. Here’s an example: if you can get a VA loan at under 4% and get 5, 6, 7 percent or more on a conservative investment why not do it? Many index mutual funds easily get that type of return. You’d be money ahead to take your extra monthly income and make such an investment. We’re not financial planners but we do suggest you talk to investment professionals to see how such a plan may be good for you. There’s even more to the advantages.
Our third main advantage of a VALoanMN mortgage loan is no monthly mortgage insurance, even when you finance 100% of your home’s purchase (or refinance) price. A conventional or FHA mortgage requires a monthly insurance premium unless you put 20% down. This can be a savings of many dollars each month.
There is one more advantage for some of our veterans. In Minnesota a disability can exempt a veteran from paying some or all property taxes. We can help you with that also.
Interest rates rise and fall. We’ve been advising for months (actually years!) that you take advantage of these historic low rates. Given the other advantages of a VALoansMN mortgage it is an unbeatable deal for you. Contact your County Veteran’s Service Officer and they can tell you more about VALoansMN. Or call Brad directly (612 240 9922) to talk about your needs. We are here to serve you.
We just can’t help but take notice on the 1st of April of that infamous day. We also can’t help but brag a bit that our clients at VALoansMN are no fools. Veterans take notice of opportunities and here’s one to see.
Are you among those who took out a home equity line of credit (HELOC) a decade ago when home prices were peaking? If so, you may be among those who is now receiving notice that your heloc payment is going way, way up! Here’s what’s happening and here’s how we may be able to help.
Banks were pushing HELOCs ten years ago to help homeowners pay off other debt or fix up the house. It was an inexpensive and tax favored way to borrow. Inexpensive because HELOCs are like having a pile of cash to use as you wished and the only payment was for the interest only. If you used it to improve your home you could write off the payment against your income for tax purposes. For ten years you only had to pay interest only on the loan. But now the ten year “interest only” feature is over or coming to an end.
If you borrowed $50,000 at 8.25% in 2006 your monthly interest only payment during this “interest only” period would be about $344. Here’s what’s happening now as the ten year interest only period comes to an end. The bank is recasting your line of credit into a 15 year 2nd mortgage. The payment increases from about $333 to about $478. That’s an increase in your monthly payment of about 43%! Can you afford that? There’s a reason these instruments are called “HELOCs from Hell?. Maybe we can help.
Now be the time for you to contact us at VALoansMN and let’s see if we can roll your existing first mortgage and your heloc into one VA guaranteed home loan at today’s very low rates. We guaranty we’ll be able to cut your monthly payment way below what you’ll be paying on that existing 8.25% home equity line of credit as its interest only period ends.
Home equity loans were great when home prices were soaring and you needed cash to cover that new kitchen, bath, roof and other remodel projects. But now you are going to pay a steep price as the heloc is recast into a 15 year second mortgage. Let’s see if we can help with a VA Loan. Call Brad today and let him make it happen for you!