Hawaii VA Loans

We have recently completed a three week stint where rates increased almost every day.  They have stabilized in the past week and even rebounded slightly, but that recent scare has everyone guessing where rates are headed next.  If you are anything like me, you have been hearing every possible scenario lately.  Of course, no one really knows what the real answer is, but we can do our best to analyze the reasons that each extreme could happen and hopefully define a reasonable expectation.

Let’s look at the rumor that we are all hoping for…will rates go down to 4.00%?  Unfortunately, I don’t think there’s much chance of that happening.  What brought the rates down to the low 4% range several months ago was the announcement and beginning of the Fed’s program of buying mortgages packaged by Fannie Mae and Freddie Mac (the majority of mortgages originated in the U.S.).  They are now about halfway through that program now and there isn’t much room for them to increase the amount of buying they can do.  Last week they announced that they will not be expanding that program.  They can no longer reduce the short term borrowing rates which are already at zero percent.

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Earlier this year Congress & President Obama signed into law the American Recovery and Reinvestment Act of 2009. This bill, enacted to help stimulate the battered economy, included a tax credit of up to $8,000 for First-Time Homebuyers, replacing the old $7,500 tax rebate program.

According to industry reports, first-time homebuyers now account for more than one-half of all home sales. It’s obvious that this tax-credit, as well as historically low interest rates, are providing huge incentives to potential home buyers who were previously sitting on the fence to now make a move. In addition, those who were not interested in buying a home in this market, are seriously reconsidering with these new incentives dangling in their face.

Now before you rush out and start applying for a mortgage loan, here are 5 important things to know about this $8,000 First-Time Homebuyer Tax Credit:

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This is a question that may have a surprising answer.  Many peoples’ first instinct is to conclude that if prices are falling, it would be smarter to wait for your dream home to decline in price and to buy at a later date and lower price.  However, interest rates play a significant role in the home buying process and should also factor into the decision.

The truth is, interest rates are at historic lows and, as the graph shows, have not been lower in at least 45 years.   The government has pledged to buy mortgages to help keep rates low, and they have done a great job keeping interest rates between 4.50% and 5.00% over the past few months.   However, the government’s help won’t last forever and investors will need the higher returns they’ve demanded in the past.   Without that support, interest rates would likely be significantly higher right now.  With rates so low and the government intervention fully priced into the market, there is a greater likelihood that they will move up not down.

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I had the pleasure of meeting Tyler Mata and his dad Robert at one of our VA Loan Seminars last fall.  What struck me about Tyler was that he was relatively young (early 20’s) and he was already ahead of the game in terms of his finances.  Good job, great credit, little debt and proactive with saving his money.  It’s very refreshing when I get the opportunity to work with young home buyers who have put themselves in a great position to qualify for a mortgage by being disciplined with their money.  After meeting his parents, Valerie & Robert, it was clear to see that he received the proper guidance and support from his family that enabled him to get where his is at today.  I wish all the best for Tyler and his girlfriend, Kristen as they are proud new homeowners thanks to the VA Loan program.

Tyler completed his 3 year service in 2003 and returned home in hopes to start a new life and a dream of one day becoming a homeowner. He worked hard and saved money, but the price of houses just made his dream seem so out of reach. In November of 2008, he decided to see what the VA could offer him by signing up for a VA Loan seminar. This is where he met Gabe Amey (Branch Manager of Hawaii VA Loans.) This was the beginning of his realization that his dream of owning a home was actually reachable.

In December, Tyler began his house hunting and found a house in Mililani on the internet. Being that Gabe had already pre-qualified him, he knew his limitations and had numbers that he could work with when he met with his realtor. He made an appointment to see the house the next day and although the house needed a lot of work, he saw a house with a garage that was one of his personal requirements because he works with cars. He also looked beyond all the work that needed to be done and saw the potential of turning the house into his “home”. He put an offer on the house and then after waiting on pins and needles, he got the good news that his offer was accepted.

Tyler immediately called Gabe and he and his realtor worked together to make the transaction go through as smooth as possible. Needless to say, there were lots of paper work, but Gabe was there every step of the way. There were times when I needed to get answers from him immediately, and he was always reachable. Gabe always made us feel comfortable and no question was too unimportant to ask. With Gabe’s expertise and guidance Tyler signed papers on January 29, and on February 6, 2009, Tyler was given the keys to his new house. Tyler immediately put his valuable skills to work and with the help of family and friends, transformed his house to a “home”.

I finally got the opportunity to meet Gabe at Tyler’s house-warming party this past Saturday and to personally thank him for all his work and support. We are so very proud of our son and it is a wonderful thing to see his dream come true. We have always told him not to give up on his dreams and this proves that dreams DO come true. Thank you so much Gabe, for making this possible. We appreciate all you have done for us. We encourage veterans to take that step and seek the help that is out there and get the ball rolling so that you, too, can become a very proud home owner.

Thank you

Tyler’s mom & dad
Robert & Valerie Mata

“What interest rate can you offer me?”  Ask any mortgage loan officer and they will tell you that this is probably the first and most commonly asked question they get from their customers.  Rightfully so, since the interest rate determines what your mortgage payment will be and, of course, we all want the lowest payment possible.

Now, this is a loaded question because one’s interest rate depends on many factors like down payment, equity in the home, credit score, property type and when you actually lock in the rate (here’s an old post we wrote on what determines mortgage rates).  Another important factor is the type of loan program you are using - a Conforming loan (a mortgage which the meets the underwriting requirements of Fannie Mae or Freddie Mac - and is most likely sold to them) or a Government loan (mortgage guaranteed by the government, most typically an FHA or VA loan).

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Let’s start off by clarifying that a condo is not an “apartment” building.  Apartment buildings are multi-unit buildings owned by one entity with units that are rented out.  A condominium or “condo” for short is a way of owning property.  Condos often resemble apartments in the sense that they can be similar in physical appearance.  Especially in cities, they are often multi-story buildings that contain many units.  The difference is that each unit in a condo is individually owned.  Of course, a building is composed of more than just the units.  Sometimes there is a pool, lobby, lawn or some other common area.  Each unit owner has a proportionate interest in the common areas.  For example, if there is a condo with 100 identically sized units, a pool, barbecue area and lobby, each unit owner owns a 1% interest in all of those elements as well as the walls of the building, elevators, etc…

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