Buying your own home is above all else, the great American dream. For just about every citizen, it motivates us to work hard in our chosen profession, to implement wise spending practices and to incrementally save our money. It’s these factors that are most likely to determine your realistic prospects of home ownership.
For military service members, the goal of home ownership is just as important. Our military personnel may spend prolonged time away on duty, but the idea that they can return to their very own home is undoubtably a driving force behind what they do.
The first step in home ownership obviously begins with finding the right home for you and your family. After you’ve decided on a geographic location that you’d prefer to live in, you will need to consider:
- The type of neighbourhood you’d like to live in
- The proximity of the home to schools, infrastructure, public transport and shopping facilities.
- The sort of features that you want in a home. For example, how may bedrooms will it need? Will you need a secure garage?
- Are you willing to compromise on smaller yard if it means additional space inside the house?
It’s these questions you need to ask yourself, before you can move forward in your journey towards home ownership.
One of the best places for you to start your search is at Zillow.com.
For military service members, your VA Housing Benefit gives you the opportunity to purchase a home at a competitive interest rate – without requiring a down payment or private mortgage insurance. Cash Out Refinance Loans allow you to take cash out of your home equity to put towards items such as paying off debt, funding education, or making home improvements.
Even if you have been declared bankrupt in the past, this does not exclude you from this assistance. In cases where a veteran has been previously been declared bankrupt, the Veteran’s Administration will however, require a period of 24 months from the date the bankruptcy was discharged.
Whilst a down payment is not required on VA loans, veterans are still responsible for closing costs. The veteran can elect to pay these costs out-of-pocket or receive seller and/or lender credits to cover them.
VA loan closing costs average around 1% – 3% of the loan on bigger home purchase prices and 3% – 5% on of the loan amount for smaller home purchase prices.
It should also be noted that the seller is able to pay the veteran’s closing costs – up to 4% of the home price. In these circumstances, it’s possible for veterans to have no out-of-pocket costs when buying a home. This represents an incredible home buying opportunity for veterans.
The typical closing costs associated with a VA loan are mainly tied to VA fees and Lender fees, Third Party Fees and Prepaid Items.
- VA Fees and Lender Fees– A great benefit to VA Loans, as the VA limits the amount of fees a lender can charge.
- VA Upfront Lending Fee– This goes directly to the Veteran’s Administration to offset costs of the VA program.
- 1% Origination Fee – This fee is used to compensate the lender in full.
- Discount Points – Separate from the origination fee, this payment is used to purchase a lower interest rate, as opposed to compensate the lender.
- Third Party Fees– Examples include Escrow companies, credit reporting agencies and appraisers.
- $500 – A VA Appraiser will determine the value of the home and ensure it meets minimum property requirements for VA loans.
- Title Report/Title Insurance Policy. $300 – $2,500+ – This fee protects both the lender and the buyer in case one party claims ownership to the home, to the disagreement of the other party; and wins in a court of law.
- Recording Fee. $20-$250 – Meaning that the sale or refinancing of the home becomes public record.
- Credit Report Fee. $35 – Used so that the lender can engage a credit reporter to determine your past credit history.
- Flood Certification. $20 – To ascertain if your property is in a ‘flood zone’.
- Survey Fee. $400 – A company will survey the property to determine where all physical property lines are located.
- Attorney Fees. $400+ – Attorneys can be engaged to interpret the sales contract as well as assist with a timely closing.
- Prepaid Items – Items that the buyer must pay in advance.
- Flood Insurance. $300-$1,000+ – Annual Insurance to be paid if your home is classified as being in a ‘flood zone’.
- Homeowner’s Insurance. $300-$1,000+ – A standard, yearly cost to protect against things like fire damage and other property damage.
- Escrow Deposit/Tax and Insurance Reserves. $300-$2500+ – These funds act as a safety net. When time comes for taxes and insurance to be paid, this fund ensures that there’s enough in reserve to pay them.
VA Loans provide an exceptional option for veterans as they remove the necessity for a down payment. As mentioned, there are even cases where the seller may elect to pay for closing costs. This represents a unique buying option for those in the military.
Whilst it is still vital for buyers to consider factors such as their income and their debts, a VA Loan stands out as a viable, trusted option for veterans.