I have a question about VA Home Loans

iVillage Member
Registered: 09-25-2003
I have a question about VA Home Loans
51
Wed, 02-04-2004 - 11:15pm

DH has said he'd like me to look into a VA Home Loan that we would use to purchase the home we're currently renting.

Virgo
 

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iVillage Member
Registered: 03-26-2003
Wed, 02-04-2004 - 11:20pm
No, a VA loan is only for the purchase of the home and you cannot borrow more than the house is worth, which is why you have to have a VA inspection. If you want money for home improvements then you would have to take out a seperate loan for that.
iVillage Member
Registered: 09-25-2003
Wed, 02-04-2004 - 11:48pm
Thanks. . .I thought you might know.
Virgo
Virgo
 
iVillage Member
Registered: 03-26-2003
Thu, 02-05-2004 - 8:18am
Personally? I'd do one of two things.

1) Get the VA loan, but hold off on renovations until YOU are the guys who are going to be living there. If you're going to rent it out, don't bother upgrading beyond what makes the place rentable at a median of the going rate for similar homes of that type. I mean, why waste all the nice upgrades on a renter (and take the chance of having to replace them ANYWAY if you get a lemon). Then, when you're retiring, get a home equity line of credit for the renovations, do them and then refinance the house for enough to pay off the equity line. VA Loans are kinda testy wrt cashing out equity, so borrowing enough to buy AND renovate might be tricky unless the house will appraise for considerably more right now than you're buying it for.

2) Have the current owner finance the house, plus renovation costs in a short-term (10 years or less) balloon loan where you're paying interest but no principal. Then *after* the renovations are complete, have the home reappraised and get your VA Loan, pay off your owner (who has made a NICE profit in just the interest payments, let alone the profit from the refinance).

I take it back, you have a third and possibly 4th option as well.

Look into FHA Loans. They are VERY similar to VA; but instead of having the buyer pay the closing costs (like the VA) and having to make a small down payment, you can finance your down payment through the FHA and just pay for closing--between FHA and VA for the same loan amounts, you wind up at roughly the same bottom line at closing--not much.

Also, look into FNMA sponsored first-time buyer programs in your area. You may be able to swing a much better loan through them than either FHA or VA.

And as a fifth option, have your buyer finance your loan in its entirety. It's a GREAT deal for him monetarily--just show him his monthly income from your mortgage alone--and it's a nice, long-term income, too. You have more options than VA, although VA loans are NOT bad.

iVillage Member
Registered: 03-26-2003
Thu, 02-05-2004 - 8:26am
There is *one* exception; you *can* get up to $6K above the mortgage amount for improvements that specifically improve energy efficiency (like upgraded heat pump, energy efficient windows, upgrades to insulation).

http://www.aegiswholesale.com/LoanLibrary/9n9dvpmobtfl_2/VA/VA01.htm

iVillage Member
Registered: 03-26-2003
Thu, 02-05-2004 - 8:31am
With a VA loan you do not have to make any downpayment. That is the whole idea behind a VA loan, since the government is backing it so you do not need a down payment or pay PMI insurance. Also just like any other loan with a VA loan who pays what closing cost are negotiable, when we bought our first home, the seller paid the closing, then when we sold that house we paid the closing. In the house we are in now we paid the closing.

Also you can use first time buyer programs along with a VA loan. That is what we did with our first house. We were able to get the first time buyers rate of 6.25% which at the time (1988) was outstanding.

iVillage Member
Registered: 09-25-2003
Thu, 02-05-2004 - 9:06am

Unfortunately, the kind of improvements I'd like to make are more along the cosmetic lines.

Virgo
 
iVillage Member
Registered: 03-26-2003
Thu, 02-05-2004 - 7:50pm
Doh! You're right. I got FHA and VA backwards. FHA lets you finance the closing costs, not the downpayment.
iVillage Member
Registered: 03-27-2003
Wed, 02-11-2004 - 8:24pm
You are correct, but you have to pay a very good size funding fee for a VA loan. This funding fee is added on top of the loan, so it isn't out of pocket but it is added on to your loan. So, while you may not pay MI, you still have to take in account the funding fee.
iVillage Member
Registered: 03-27-2003
Wed, 02-11-2004 - 8:27pm
Yes, you have to have a down payment for FHA, but it is only 3% and the seller can pay up to 6% in closing costs on your behalf. Also, FHA let's you have your 3% of your own money or a gift from a family member. Also, FHA allows gifts from non-profit agencies like Home Gift USA. This program is essentially allowing you to finance your down payment.
iVillage Member
Registered: 03-26-2003
Wed, 02-11-2004 - 10:29pm
Correct, but for those that don't have a down payment and qualify a VA loan is about the best deal around.

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