Veterans / Active Military: 9 Home-Buying Costs You Should Keep In Mind

Veterans Buying A Home

For veterans and active military, VA loans are a great way to achieve the dream of homeownership. More than 22 million service members have used these flexible, no down payment loans since 1944.

But when people hear “no down payment,” they often don’t realize they’ll still need some cash on hand to finish the deal.

“Zero down does not mean zero to close,” points out Gwen Chubirko, broker in charge at Genesis Realty Co. in Kannapolis, NC.

The good news is that buyers don’t have to go in blindly: Your VA loan-savvy real estate agent will be your ally in helping you estimate the costs you will need throughout the process, no matter where you live.

“Our goal is to save veterans money and get them into a home that they’re happy with,” says Realtor® John Ulrich, broker associate with Illustrated Properties in Manalapan, FL.

While the amount you need to close will vary according to your location and situation, experts say you can usually expect to need about 3% of the purchase price on hand to close.

Want to break it down? Here are some home-buying costs that veterans and active military shouldn’t overlook:

1. Credit Report
Buyers will often pay this fee, which runs, on average, about $30, to their lender when they first apply for a loan. Be aware that this fee is nonrefundable even if the loan doesn’t close.

2. Earnest Money
The earnest money deposit is key to the home-buying process. It essentially allows you to put a “hold” on a house while you conduct the inspections and appraisal. Without earnest money, you could theoretically make offers on many homes, essentially taking them off the market until you decided which one you liked best. As the name suggests, it shows that you are earnest about moving forward on the purchase.

“The seller wants that buyer to have some money in the game when they take the house off the market,” Chubirko explains.

Depending on where you live, you can expect to put down anywhere from 1% to even 10% of the home’s purchase price as earnest money. (In some highly competitive markets, buyers are making even larger deposits in an effort to stand out.)

But don’t worry! Whatever you put down for earnest money will go toward your down payment and closing costs as soon as the deal goes through. (If the deal falters, you could lose some or all of your deposit, depending on the reason why the agreement tanks.)

3. Appraisal
All VA loans require an appraisal to ensure the property is up to acceptable standards and meets the VA’s Minimum Property Requirements. What does that mean? Well, an appraiser will calculate the square footage, confirm the property is worth the price you’re offering, and that it’s safe, structurally sound, and sanitary. Among other things, the appraiser will check for safe mechanical systems, acceptable roof life, and hazard-free basements and crawl space. VA buyers will often pay for the appraisal upfront, but they may be able to recoup the cost at closing.

4. Home inspection
While the appraisal is required, a home inspection is technically optional (except for a pest inspection, which is required in certain states and can cost roughly $50 to $150). But you never want to take a pass on the inspection, unless you’re buying a tear-down (not with a VA loan!).

The home inspection is your all-too-crucial opportunity to uncover any problems with the house before you make it official. It’s also your chance to point out repairs you can ask the seller to make on your behalf (and those repairs could cost much more than the inspection itself, which is going to run about $300 to $500.)

5. Recording Fees
Recording fees must be paid out of pocket at the time of closing. This is the fee you pay the county to record your mortgage in the public record, and the cost varies from county to county.

6. Real Estate Transfer Taxes
These costs vary by state—from none in Indiana, to a $2 flat fee in Arizona, to $2 per each $500 in value in New York. States, counties, and municipalities collect these taxes to transfer the title of the property from the previous owner to the new owner.

7. Title Insurance
Title insurance protects you (and your lender) in the event there are title issues from previous owners of the home. The average cost of title insurance is around $1,000 per policy, but that amount varies widely from state to state and depends on the price of your home.

8. HOA Fees
If you buy a home in an area where there is a required homeowners association, you will need to pay the application fee, which is variable depending on the local rules. Then there are your monthly dues. For a typical single-family home, HOA fees can cost homeowners around $200 to $300 per month, although they’ll be lower or much higher depending on the size of your unit and the amenities.

9. Loan Origination Fees
An origination fee is one of several that will make up your closing costs. The VA allows lenders to charge up to 1% of the loan amount to cover origination, processing, and underwriting costs.

The bottom line? While VA loans are a great option for veterans hoping to buy a house, being prepared before you apply will ensure no surprises throughout the process.

Original Source

Realtor/Broker NC-SC
Coldwell Banker Sloane Realty
16 Causeway Drive
Ocean Isle Beach, NC 28469
Direct: 910.443.0398
Toll-Free: 800.237.4609 X206
Fax: 910.579.5877

*Search Coastal Carolina Real Estate in real time on your own. No obligation. FREE sign-up below:

VA Loan: 5 Things You Didn’t Know It Could Do for You

VA Loan Benefits

A VA Loan provides benefits. Because of the bravery and sacrifices of veterans and active military, the rest of the country’s civilians can live the American dream in safety. As one tangible way to say “thank you for your service,” current and former members of the military have access to Veterans Affairs home loans. These unique mortgage options allow veterans and those still serving to own a piece of the American dream by potentially qualifying for homes they might have thought were out of reach.

Veterans, active-duty service personnel, and select Reservists or National Guard members are among those who can quality for VA loans. (Find specific eligibility requirements here.) Wondering what some of the benefits of a VA loan might be? Here are five to consider.

1. No down payment
This is one of the most valuable and touted benefits—and for good reason. Saving enough for a down payment can be the biggest obstacle to buying a home. But a VA loan eliminates that roadblock.

“Most of the buyers I work with don’t have extra resources available, so the fact that they can purchase a home with zero down makes the transaction feasible,” says Benny Dinsmore, a Realtor® with Coldwell Banker in Frisco, TX.

In most parts of the country, qualified buyers can purchase up to $424,100 before factoring in the cost of a down payment. In pricier areas, borrowers can go beyond that threshold.

But beware: The “no money down” aspect of a VA loan shouldn’t be confused with “no money out of pocket,” a common misconception, notes Michael Garcia, broker and owner of TQS Realty in Palm Beach, FL.

A VA loan still requires closing costs and the earnest money deposit (a negotiated amount of money that the buyer puts in escrow to essentially “hold” the house).

“However, that money will often come back at the closing, when the title company will write a check back to the veteran on the spot for the total amount that was put into escrow,” Garcia says.

2. More lenient loan requirements
The required credit score for a VA loan can be lower than for a conventional loan—around 620 for a VA loan compared with a range of 650 to 700 for most conventional loans.

In addition, the required debt-to-income ratio for VA loans is often more flexible than for conventional mortgages.

“It allows someone with less-than-perfect credit and some debt to still be able to qualify for a loan,” Dinsmore says.

3. No mortgage insurance
Most conventional buyers have to pay private mortgage insurance if they put less than 20% down. FHA loans come with their own forms of mortgage insurance. But a VA loan waives that insurance requirement.

And trust us—this one’s important.

“This can be a big savings in monthly payments, since PMI typically runs around $200 a month,” says Realtor® Twila Lukavich with Russell Real Estate Services in Cleveland.

Even though there’s no mortgage insurance, there is a “funding fee”—an upfront cost applied to every purchase loan or refinance. The proceeds help the VA cover losses on the few loans that go into default. But borrowers can roll it into their monthly payment, or pay it all at once. Plus, it’s tax-deductible. And veterans with a service-connected disability don’t have to pay the funding fee at all.

4. Limited closing costs
Legally, veterans are allowed to pay for certain closing costs, which include the following:

  • Appraisal
  • Credit report
  • Origination fee
  • Recording fee
  • Survey
  • Title insurance

But there are some fees that veterans are not allowed to pay. And the VA allows lenders to charge no more than 1% to cover the costs of originating and underwriting the loan.

So for example, if the purchase price is $280,000, the veteran might offer $300,000 and ask for 3% back to cover the closing costs.

“In this way the veteran is essentially financing their closing costs into the loan, meaning less out of pocket at the start,” Dinsmore explains.

5. Extra assistance with appraisals
When a home that a veteran is considering purchasing is having trouble reaching the purchase price during the appraisal process, buyers and lenders can ask the VA appraiser to consider adjusting the valuation before making a final determination.

Appraisers notify lenders in the event the appraised value is likely to come in low, giving buyers and real estate agents 48 hours to supply additional information that the appraiser might not be aware of to help justify the home’s value.

“Typically I assemble an itemized list of upgrades and improvements that the seller has performed on the home in the past three years that the appraiser didn’t know about, and therefore didn’t include in the home value,” Lukavich says.

This process “gives the agents an opportunity to assist the appraiser in making sure they have the whole picture of the home and gives the local agent an opening to help an appraiser be educated on specific local values,” she adds.

It’s just another benefit of VA loans aimed at helping our service men and women buy the home of their dreams.

Orignal Source

Realtor/Broker NC-SC
Coldwell Banker Sloane Realty
16 Causeway Drive
Ocean Isle Beach, NC 28469
Direct: 910.443.0398
Toll-Free: 800.237.4609 X206
Fax: 910.579.5877

*Search Coastal Carolina Real Estate in real time on your own. No obligation. FREE sign-up below: