Three bonuses for VA loan borrowers make for one sweet home-buying opportunity:
- Reduced Home Prices
- Historically Low Interest Rates
- Zero Money Down
The rare combination of depressed home prices, historically low interest rates and no-money-down trait of VA loans makes now maybe the best time ever to use military home loan benefits.
According to the S&P indices, today’s home prices are what they were in early 2003. It’s hard to predict when prices will go up. But, the housing price graph that’s been on a down slope since 2006 may be bottoming out. The graph, which looked like a black diamond ski slope in the second quarter of 2011, now looks more like a bunny hill. Home prices are still falling, generally speaking, just not as fast. Prices began to drop in 2006. Since then, annual reports, on a national basis, show that home prices have decreased. An annual increase in home prices would be a sign that the home market is improving.
Historically low interest rates are another bonus for veterans using VA home loan benefits. The rates are so low that 15-year mortgages have become the new trend. Borrowers who qualify can get VA purchase loans at the shorter term, with a monthly payment they can afford, and save a small fortune in interest over time. A 15-year VA loan today compared to a 30-year VA loan from a few years ago can help drive this point home. Both examples show fixed-rate loans of $250,000:
- 15-year VA loan at 3.2%(today) = $1,750 monthly payment and $65,109 in total interest*
- 30-year VA loan at 6.5%(2008) = $1,580 monthly payment and $318,861 in total interest*
(*Interest which would be paid over the full life of the loan)
Together, the savings over time from low interest and cheaper home prices make owning a home reachable for many VA-eligible borrowers. But, the bonus of zero money down, unique to VA loans, gives military borrowers an edge. Many conventional lenders request 20% cash down payments for purchase loans. On a $250,000 home purchase, that’s $50,000. VA-eligible qualified borrowers can keep savings intact by avoiding down payments. The VA loan program is one of few that allow for no money down on purchase loans within conforming loan limits.
For more on VA loans, contact an approved lender.
Veterans First is a trade name of Wintrust Mortgage, a division of Barrington Bank & Trust Company, N.A., a Wintrust Community Bank. I NMLS# 449042 I Equal Housing Lender