The VA Home Loan Program Benefits

VA-Loan-Program-Hawaii

The VA home loan program provides numerous benefits over other types of loans. If you are a veteran and looking to buy a house, this is the best, quickest, and most cost-effective option for you. The application process is simple, and a pre-approval can give in as little as an hour. There are also flexible underwriting guidelines, with the most lenient debt-to-income ratios allowed, as well as no down payment or PMI requirement. In addition, VA loans have competitive interest rates that can be as low as 2.25% APR with no prepayment penalty.

But you likely know all these things and the title of this blog is Advanced Strategies for your Hawaii VA Home Loan purchase, not VA Home loan 101. Let’s get into advanced strategies for utilizing your VA Home Loan Hawaii benefit.

 

Ariel photo of Oahu, Hawaii. Refinance VA Loan programs are offered on Oahu for military veterans.

Aerial panorama of the west coast of Oahu with Makaha Valley and Papaoneone beach. Hawaii, USA

What to do if you are tight on money for closing costs?

I want to provide a few options other than what lenders usually recommend, which is taking a higher interest rate for “lender credits”. This option should rarely be your choice unless none of the below apply to you and/or you are not able to take advantage of them.

    • The seller can provide up to 4% back to cover closing costs
      • As a VA buyer, you can ask the seller for a certain amount of cash back to cover the closing costs. 4% will almost always be well over the closing costs here in Hawaii. Further, in this seller’s market, it will be difficult to ask this when many offers are going over the asking price. This leads us to option ii.
      • After the seller accepts your offer, ask to increase the sales price by whatever amount you want them to contribute for closing costs. If you desire $7,000 and the accepted offer is $800,000, then ask to amend the contract to 807,000 with the seller giving you $7,000 towards closing. This is a simple way to roll your out-of-pocket closing costs into your VA Loan.
      • A twist on this method is to wait until the appraisal is completed. Providing the appraisal comes in higher than what you are under contract to buy the property for, ask the seller to increase the sales price to the appraised value and give you that money as a seller’s credit towards closing costs. Both options are dependent on the appraisal coming in at value.
      • If you have PCS’d recently and your savings are short, you can take a 1-3 month advance on your base pay within 30 days of PCSing or up to 60 days after your arrival at your new duty station. You just have to fill out the DD Form 2560 and submit it to your local comptroller officer for your 1-month advance. For 2-3 months you will need your Commander’s signature and approval from the comptroller’s office. One thing to note, this is only recommended if your debt-to-income ratio is low, meaning you have little debt. If you have a lot of debt, or you are buying a more expensive home, speak to a VA loan specialist to see if this is something you can do.

Buying your home as an investment? Why not buy a multi-plex with your VA home loan benefit?

If you are truly buying your home as an investment, and not something that will be a forever home, why not buy a multi-plex? You can buy a duplex, triplex, or quadplex with your VA home loan benefit. Often, the income generated from the other units will cover the mortgage and the VA buyer will essentially be living rent-free!

Hope these tips help! “

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Using geopolitical events to time your refinance

Time-your-refinance-in-hawaii

So many times we have clients who apply for a streamlined refinance, but for whatever reason, they are hesitant to pull the trigger. Maybe their current rate is at 3.75% but doing a VA Streamline refinance or Hawaii IRRRL to reduce their rate to 3.25% isn’t that exciting, and potential clients are holding out for an even better deal. We have a lot of clients like this, and there is nothing wrong with this mentality. The key is to be ready to lock the rate you’re holding out for when that rate arrives.

Last month’s strike on US bases in Iraq by Iran brings up a subject many Mortgage professionals do not talk about; the importance of timing to our clients’ refinancing. For instance, a look at TLT an ETF that attempts to mirror bond prices. Taking a look at the chart, there was over a 3% swing in bond prices during the day. A person doing a refinance who took advantage of the swing this day would’ve saved thousands on their mortgage. Within 24 hours tensions had decreased and those rates had disappeared.

Oahu mortgage refinancing for homes like this can be estimated using our VA refinance calculator,refinance mortgage rates hawaiiOf course, timing is important, but our clients waiting for better rates need to be ready to act immediately when a geopolitical event such as Iran’s attack occurs. If you are one of these folks on the refinancing fence, waiting for a certain rate then I suggest getting your necessary documents to your mortgage professional so they can lock when you are ready. For VA Streamline refinances (IRRRLs), documentation requirements are simple:

  • Mortgage statement
  • Mortgage payment history (proof of payment for the last 12 months)
  • Homeowner’s Insurance
  • Homeowner’s/Condo association bill

That’s it. Too easy! With the uncertainty in today’s current climate (coronavirus, impeachment, etc.), now is the perfect time to prepare for a drop in rates and take advantage of refinancing your home.

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Mortgage Loan: Reasons to Refinance Your Mortgage Loan

Refinancing-your-mortgage-loan-in-Hawaii

I was planning on writing about the mortgage process, steps to best prepare for buying a home, etc. However, the recent Omicron variant has led to another, potentially the last spike down for interest rates before they start to march upwards.

A few reasons why people should refinance their VA mortgages now:

  • Lower your interest rate: This may be the last time to lower your interest rates and take advantage of near-all-time lows. The average home price is skyrocketing, why pay more $$$ towards interest than you have to?

  • Lower your monthly payments: Lowering your interest rate and lower monthly payments go hand and hand. Lowering your interest rate from 3.75% to 2.875% on a 700K loan will save $400+ a month. That is a car payment, more money for your IRA, etc. Why pay this extra interest to the bank!?

  • Eliminate mortgage insurance: With the massive appreciation over the last few years, many folks could already be sitting on over 20% equity. A refinance would allow them to reduce their interest rate AND eliminate mortgage insurance! That’s a no-brainer.

  • Pay off your home faster: Another option is to simply lower your interest rate and reduce the years on the loan. Taking the savings from your lower interest rate and applying it towards the principal balance will pay your home down faster. Or, you can simply lower the term on your loan — say you had 20 years remaining at 3.75% and reduced it to 15 years at 2.75%. The lower interest rate would negate some of the increase in monthly payments, and you would be paying your home off 5 years quicker. Personally, I prefer leaving mortgages at their original terms (or rolling them back to 30 years) as the increased cash flow gives you options to pay down your mortgage more quickly or do something else with your money.

  • Consolidate high-interest debt: Another option is to take out some equity to pay off higher-interest debt. This usually enables homeowners to increase their monthly disposable income considerably.

Wrap Up

There are many reasons to refinance now and I highly encourage homeowners who purchased and/or haven’t refinanced since February 2020 to look into refinancing. Refinancing usually requires no money out of pocket and can save homeowners significantly. Our C2 Financial team lends nationwide. Feel free to reach out for a free consultation with Oahu’s top VA mortgage broker to see if VA refinancing might be right for you!

Image of children of a military family at a naval dock. Elias provides VA Home Mortgage Loans to military families like this.

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