Hawaii VA Loans

2009 is sneaking upon us very quickly.  In the mortgage business that means new loan limits.  Hooray!  Traditionally, this means that the OFHEO (Office of Federal Housing Enterprise Oversight) releases their Housing Price Index data, which results in higher loan limits for FHA, VA and Conforming (Fannie Mae & Freddie Mac guaranteed) types of loans.  This year’s data doesn’t warrant an increase in the loan limits, but thanks to decisive action by our fearless leaders, we have new rules that expand the available loan amount limits by examining home prices at a more regional level.  For many counties across the contiguous United States, the loan limits will stay the same, but for High Priced Counties, the loan limits are now adjusted according to the cost of an average home in the county.  Here in Hawaii, each island has its own limit, but they all exceed the prior limit of $625,500 that had been in effect for the past two years.

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This is a tricky question and one that we, as VA Loan Specialists, have a hard time answering simply.  The best answer is, in fact, “it’s complicated”.  So, with that in mind, let’s take some time to see how the rules are applied.  Thankfully, the VA has recently posted clarifications and examples to make it easier on all of us.

The first thing that we need to understand is that the VA now adjusts the maximum loan amounts by county thanks to recent changes intending to support the ‘Jumbo’ loan market that lenders have shied away from in the past year.  Some counties may be at the national limit of $417,000 but if housing prices are higher than average, they may have a higher limit.  Here in Honolulu, the limit is currently $793,750 but will adjust downward to $721,050 at the beginning of the year.  Remember, that is the max for 100% financing, and that the VA program will actually allow for loan amounts greater than that as with a minimal down payment.

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One of the main reasons we started HawaiiVALoans.com was that we found that there were so many misconceptions about VA Loans.  Whether it was the broker/lender giving the wrong information or Veterans finding outdated information from non-reliable websites - it was evident that for whatever reason, the facts about VA Loans were getting distorted.

Over the years - we’ve heard it all.  I thought it would be a good idea to debunk the 5 most common myths we’ve heard about VA Loans:

1. “I can only use my VA Loan eligibility once”

This is by far the most common myth we hear - but this is definitely false.  There is no limit on the number of times you can use a VA Loan.  Now if you’ve had a VA loan previously, you need to have had your entitlement restored by paying off the mortgage (pay off balance, sell the property, refinancing into a conventional mortgage) in order to get another VA Loan.  There is a possibility  in which you could have more than one VA Loan outstanding at a time - but only if you didn’t use your entire entitlement on the purchase of the first property.  Now if you’ve already used a VA Loan previously, you just have to keep in mind that the cost of the VA funding fee is increased from 2.15% to 3.3% (no down payment) for every subsequent use of a VA Loan.  If you’ve accumulated equity on the sale of your first home, and you can put a 5% down payment the next time, your funding fee can be reduced from 3.3% to 1.5%.

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Having little to no money in the bank can be one of the main deterrents to homeownership. In this case, the logical option would be to rent since it would be less cost upfront, right?  Well, if you are eligible for a VA Loan, this may not be necessarily true.  Let’s do the math!

Meet Cindy, Joe & Mark

Cindy & Joe are both looking to buy a $500,000 property. Joe is eligible to finance the purchase through a VA Loan. Cindy on the other hand is not VA eligible, and will purchase via a conventional mortgage.

Now Mark is eligible for a VA Loan but feels like he can’t afford the upfront costs of buying a home right now, so he’s looking to rent. He’s looking to rent a home for about $2500, which is comparable to the $500,000 property that Cindy & Joe want to purchase (see rentometer.com).

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Right about now, you’re probably getting tired of reading headlines about how bad the real estate market is and that the financial world is on its way to a meltdown.  Me too, but there’s another side to all of this, and one that you, on main street, can turn to your advantage.  Guess who else is aware of this phenomenon.  That’s right, every seller of a home currently listed for sale.  Credit is tightening for other loan programs and, in many pockets, prices are lower than they have been in years.

As a VA eligible homebuyer, you can purchase one of these homes at a value not seen in years…and with potentially very little out of pocket expense.  How so? Not only can you negotiate on price when buying a house, there’s another tool that can make getting into a home much easier, seller credit.  A seller credit is an additional sum of money paid by the seller for you to use to pay the closing costs on your loan.  Make sure to discuss this with your real estate agent.

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When we started HawaiiVALoans.com - our vision was to make it as easy as possible for those who may be eligible for a VA Loan to learn the basics of the VA Loan program; who’s eligible, the benefits of a VA Loan & how the home buying process works.

Step one was to create our site, HawaiiVALoans.com & the VA Loan Blog that has a wealth of information, tips and tools.  Step two was to create our 21-page eBook - “VA Homebuyers’ Guide - Understanding Your VA Loan Benefits & the Home Buying Process” and so far, we’ve received great feedback on how informative this guide has been.  Finally, we are at step three.  In an effort to continually provide more FREE information to those who would like to learn more about the VA Guaranteed Home Loan program, we will be doing a free VA Homebuyer Seminar, which we plan on holding every month.

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