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
Here’s the choice: you have money stuck away in a mutual fund that’s been appreciating at about 7% a year. A veteran can borrow money to buy (or refinance) a home for under 3%. What’s a better choice, taking money out of your mutual fund or using OPM (Other People’s Money) for a home purchase? If you answered OPM then you get a gold star from most financial planners.
The Federal Reserve is indicating they see no change in low interest rates in the foreseeable future. This is very, very good news for our V.A. loan home buyers. In the not too distant past we were urging veterans to take advantage of low V.A. loan rates because they were sure to rise. We no longer take that position. Now we urge veterans to shop for a home wisely taking your time to find the right house. We believe you are not about to see any dramatic increase in V.A. home loan rates anytime soon. \
As you begin your search start with us at VALoansMN/Leader One. Every home shopper should be armed with a pre-qualification letter. This letter puts you in a very strong position when your offer to buy is put to sellers. Even more than that, it puts you in a strong position as you select a real estate agent. Any agent is more likely to work with a home shopper who comes armed with a pre-qualification letter from VALoansMN. What does it take to have this letter? Only a phone call and a short conversation.
When you call us (612-240-9922) we will ask about your current financial situation; do you have any savings, a checking account, a steady job or are you self employed. We ask about any outstanding loans such as a car loan or credit cards. We will ask for your current address and social security number. Then we put all the available information into our system and run a credit report. Do not be afraid of this! VA loan requirements are not as stringent as you may think.
It is possible to get a VA loan even with what you may consider bad credit. First, a reminder. The V.A. is not the lender. The V.A. only guarantees or backs up your loan from a bank or other financial institution. Our lenders look beyond a credit score. They want to see your loan or credit card payment history. Do you make payments on time? They want to see how long you’ve been employed. If you’re self employed they want to know how long you’ve been in business. Do you have any bankruptcies or foreclosures in your past. Not to worry. Our job is to put together your loan “package” and present it in the best light to lenders.
Our goal is find you the best loan possible. We want to make sure you get the best interest rate at the lowest cost. This is our responsibility to you. We also want to ensure you have a V.A. loan you can afford. This why so many Minnesota, Dakota and Wisconsin veterans turn to VALoansMN. We have the experience and knowledge to get it done right. Let us get it done for you today. Pick up the phone and call Brad. There’s never been a better time to take advantage of this great benefit you earned when you served us all in uniform. Now let us serve you.
There are, in our opinion, huge advantages to a V.A. loan and over the past few years we have outlined many on these pages.
Along with all the good there comes some bad, at least in the eyes of some, so we’re going to spell them out.
As we’ve repeatedly written you can buy a home using your V.A. loan benefits with no money down. That’s good eh? However, there are some home sellers who see it as a bad. Recently we had a realtor reject an offer on a home saying the buyer “had no skin in the game” because she was not putting any money down. The buyer’s realtor should have told the selling agent the “skin in the game” comes from the Veterans Administration which is guaranteeing the loan. Still, some sellers see it as a negative. Make sure your realtor knows how to convince sellers a V.A. loan offer on a house is a rock-solid offer.
There are home sellers who shy away from V.A. loan offers because of the super strict home conditions required. The V.A. is trying to protect Veterans by putting these requirements on a property. The intention is to prevent Vets from buying money pits. They’re sort of a second set of eyes looking over your shoulder as you determine the quality of the home. This can scare some sellers, especially those who may be trying to hide something.
Perhaps a drawback to some Veterans is the funding fee required. On conventional and FHA loans if you have less than 20% down payment you’re going to pay a monthly mortgage insurance fee. There is no such thing with a V.A. loan. There is however an upfront funding fee. For first time users of the V.A. loan benefits it is 2.15% of the loan amount. If you’ve used your benefit before it increases to 3.3%. These apply to loans with a less than 5% down payment and Veterans and active duty personnel. The funding fee decreases if you have more money down. We at VALoansMN can provide details. Keep in mind, this funding fee can be part of the loan so no up-front money is required.
Finally, a V.A. loan cannot be used for secondary or vacation homes. The borrower is required to move into the home within 6 months of purchase and must stay there 1 year unless orders or other unforeseen circumstances occur.
We urge you to call us (612-240-9922) if you’re thinking about taking advantage of this benefit you’ve earned. We are a top, local V.A. lender in the upper midwest (we also serve Florida and Arizona) and are here to help you determine the best route for you to take when buying or refinancing a home.
We’ve extolled the benefits of a VA backed mortgage loan on these pages before but there is one that is exceptional and, in our opinion here at VALoansMN, deserves special attention.
First, remember that our loans are reserved for only a few. Yes, there are many military veterans and active duty men and women and all can apply for consideration. But, when one considers that only 1 in 4 American men and 1 in 50 women are U.S. military veterans you can see that you are part of an elite population. That is why the VALoansMN mortgage program is reserved for only you.
Only you as a veteran or active duty military can be considered for a mortgage which does NOT NEED A DOWNPAYMENT to purchase a home. Only you as a veteran or active duty military can have 100% financing and NOT PAY A MONTHLY MORTGAGE INSURANCE PREMIUM.
Only you can be protected by the stringent rules regulating the low fees and costs of a VA mortgage.
You can see that you are part of an elite group who has earned the right to have your home loan GUARANTEED BY THE U.S. VETERANS ADMINISTRATION. But there is one other benefit of qualifying for a VALoansMN mortgage that we think needs the special attention we referred to earlier.
Anyone who has previously had a mortgage knows that in the first several years most of your monthly mortgage payment goes to interest. If you have a $200,000 mortgage with a monthly payment of about $950 (estimation of current mortgage rates assumed) in seven years you would pay down that $200k loan by only about $28,000 dollars. Over $52,000 of those payments would be for interest. So you would have a balance remaining of over $170,000! So why is this a good thing for you? Because, while you may still owe a lot on your house, this mortgage may increase the value of your home. Huh? Read on for details.
A VA mortgage has a special feature reserved for you elite members of our society. IT IS ASSUMABLE by another qualified veteran or active duty military person. That means that if you decide in the future to sell your home a veteran could assume the mortgage you have now. So let’s say you buy your home given the numbers we’ve used so far. You pay $200,000 with NO MONEY DOWN, your mortgage rate is 4% (we’re actually doing loans with lower rates!) and you decide, for whatever reason, that you need to sell your home in 7 years. Let us ask you this question; do you think mortgage rates will be lower or higher in 7 years? Might we return to the days of 7, 8 or even 10% mortgage rates? We see that as a real possibility. But, here you sit with an assumable VA loan at 4% (or less!). And, for arguments sake, let’s say there’s another house similar to yours down the block for sale at the same price. The buyer of that house would have to get a mortgage at those higher rates (7,8 or even 10%) while you could offer your qualified veteran or active duty military person a mortgage at today’s extremely low rates. Who’s house do you think is going to sell faster?
Granted the buyer could only take over your mortgage that has a balance of about $170,000 but that might be a huge chunk of the purchase price. They could either come up with cash or take out a 2nd mortgage for the rest of the cost. Still, it would be a real saver for the future buyer of your home.
Want to know more about how you can take advantage of this program for the elite few? Give us a call at VALoansMN and let us walk you through the benefits of having a VA Loan. You’ll see why our clients consider us the upper midwest's NUMBER ONE VA LOAN SOURCE.
As we delve into what’s happening to the rate you will pay for a mortgage let us first talk a bit about this holiday season. It is a time of giving and giving thanks. Last month, and we at VALoansMN hope that every month of the year, we expressed our gratitude to you for giving us the opportunity to serve. It is a gift we receive from you every day of the year. Again, our most sincere thank you. Now we want to give you a piece of advice.
As you have no doubt noticed we have spent considerable space on these pages on the historic VA mortgage rates that have been available recently. We believe those days may be numbered so here’s our advice; if you, or someone you care for, is considering the need for a loan to buy or refinance a house, please, please let us at VALoansMN help you make that move sooner rather than later. We see changes coming, maybe slowly, but they are coming.
The Federal Reserve committee (commonly referred to as The Fed) responsible for much of the interest rate climate in our economy is talking rate increases. Currently the rate the Fed controls is at 0 to .25%. They expect to raise that rate to about 3.5%. That is an increase of over 3%. What might that do to your monthly payment on a VA mortgage loan?
First, we make an assumption that may or may not be accurate. The assumption we make is if the Fed raises it’s short term rate by a quarter point this month we would see a corresponding quarter point increase in the mortgage rate. It’s possible we may not see that mortgage rate increase. It is also possible that mortgage rates could increase more than a quarter point. No one, as of this writing, knows for sure what will happen. It is safe to say that as the Fed raises rates VA mortgage rates will increase eventually. Back to our assumption that rates will increase in tandem with the Federal Funds rate and what that means to your mortgage payment.
If you have borrowed $200,000 and your rate is 4% (we've recently secured mortgages for some clients even lower than this!) your monthly payment would be about $955. When the Fed hits the target of 3.5% for the Federal Funds rate, which is an increase of over 3%, that same $200,000 mortgage would require a monthly payment of $1,331 or an increase of about $376! Need we point out that the VA mortgage is much more affordable at today’s rates than what may be coming?
When will this increase occur? That is a very difficult question. Former members of the Fed are suggesting it will take around 3 years. The Fed meets every six weeks. To increase rates by over 3% in three years they would have to increase a quarter percent (point) at every other meeting for the next three years. However, it is possible the Fed could raise rates by a half a point or more at one meeting. This is considered not likely given the current state of this sluggish economy. Six months from now it could be a different story.
To repeat the advice we give you this holiday season: please, if you are seeing a need for a new mortgage loan either to purchase or refinance an existing loan, please call us soon so we can make this move more affordable than it may be in the not to distant future.Finally, we wish all of you a very happy holiday season!
Mortgage rates are going to be going up. There is no way current, record breaking mortgage rates can stay this low for long. Here’s what we see happening.
Home builders are constructing speculative houses at a rate not seen in years. These homes are constructed with no buyer lined up in advance. These new home builders are showing confidence that the housing market is heating up. When demand for any product increases so does the cost. But is this alone enough reason for an increase in mortgage rates? Maybe not.
By the end of last year there were almost a quarter million new homes either completed or under construction waiting for buyers. That’s an increase of about 17% over the previous year according to recent data released by the U.S. Commerce Department. The number of new homes sold in 2014 was just over 400,000. An increase from the previous year of just over 1%. Hundreds of thousands of new homes being built and sold sounds like a market heating up but there’s more to this story.
Last year’s new home sales is but a fraction of the average annual sales seen prior to 2000. The number of new homes sold needs to almost double before we get back to a more “normal” market. So, maybe this increasing demand isn’t enough to push the cost of borrowing for a new home upward.
But this is only one piece in a somewhat complex puzzle that lays out a picture of mortgage rates. Then there’s the Fed. Fed is short of Federal Reserve. The Federal Reserve has a committee of bankers that meet about every six weeks to discuss the state of the economy. If the Fed sees an economy heating up they may decide to raise the Federal Funds Rate. This sets off a domino effect and the Federal Funds Rate is the first domino. Next domino to fall is the Prime Rate, then consumer loan rates including mortgage rates. The Fed is nearing a decision to raise that Federal Funds Rate.
After their last meeting the Fed put out a statement saying they are being “patient” about the prospects of a rate increase. This is their way of saying “look, we see this economy starting to heat up so we’re getting ready to start applying the brakes before things get out of hand”. When will they start the rate increase by pushing over the first domino? Perhaps as early as June of this year.
We are laying all this out to say that we now have V.A. loans at incredibly low rates. If you’re thinking about refinancing your existing mortgage or buying a home we encourage you to move sooner rather than later. We’re talking here about a decision you make now that could save you tens of thousands of dollars over the lifetime of your loan.