The economic downturn that started in December 2007 and officially ended in June of 2009 has left many folks, especially Baby Boomers, in a housing dilemma. The home that they were planning on selling to finance part of their retirement is now:
Worth much less than they anticipated,
Has negative equity (they owe more than property is presently worth)
Allows them no cash available to purchase a retirement home, but need or want to start their retirement now.
Many of these folks wish they could rent their primary home for a while until the price of their current home has appreciated or to turn their current primary home into a rental property to assist with cash flow in retirement. Or they want to sell their present home, but won’t have enough equity from their current residence to make a decent down payment on their new retirement home.
What if you could get a 0% down primary home loan that is typically 0.5 to 1 percent lower than conventional interest rates with no private mortgage insurance premium requirement? And the closing costs may be paid by the seller? And the home is in good condition without major flaws?
Well, if you were a member of the US Military, there might be a solution to help with your personal housing crisis. A VA loan. Some Restrictions do apply and include no down payment as long as the sales price doesn’t exceed the appraised value. And the home has to fall into the home values of the particular area and may not be greater than $417,000 and your credit and ability to re-pay have to be taken into consideration.
( The exact formula is listed on http://benefits.va.gov/homeloans/purchaseco_loan_limits.asp)
Many people have never used this benefit, or did not know they were eligible. Check the list below to see if you are eligible for a VA Loan. I was surprised to learn that honorably discharged National Guardsmen were eligible.
Basically, you are eligible for the VA Loan program if you are:
• an Active Serviceman
• an honorably discharged Veteran
• a current or former National Guard or Reserve member who has been activated for Federal Active service
• a Current National Guard or Reserve member who has never been Federal active service
• Discharged member of the National Guard who has never been activated for Federal active service
• Discharged member of the Selected Reserve who has never been activated for Federal active service
• a Surviving Spouse in Receipt of DIC (Dependency & Indemnity Compensation) benefits
To check out all the information you would need see http://benefits.va.gov/HOMELOANS/purchaseco_certificate.asp
So, if you are eligible, what is next? You will need to get a COE (Certificate of Eligibility). You can get this through the VA directly on line or you can go to a lending institution that works with VA Loans. We have used Ameris Bank in Oxford, Florida, Heritage Bank in Ocala, Florida and Quicken Loans. But many banks and lenders will be able to help you get your COE. If you previously had a VA loan you are still eligible for this program. Veterans can have previously-used entitlement “restored” to purchase another home with a VA loan if you sold the home and the loan was paid in full.
Just a quick note, the VA only guarantees a portion of the loan. They do not make the loan. A bank or lending institution makes the loan.
Once you have been pre-approved, you are ready to find your new home. If you are using the services of a Realtor, let them know that you are approved and using a VA Loan. There are some special rules that have to be followed for this type of loan. The good news is these home loans can usually close in 45 days.
Because of the special VA terms, the Home Seller may pay all or part of the closing costs. The VA protects purchasers of homes by doing an independent inspection of the property. If they find any major issues, the VA makes the Home Seller repair the issue and then the home must be re-inspected by the VA before closing. The VA Purchaser cannot contribute to the cost of repairs. Because of these restrictions, only homes in good condition and being sold under “regular “conditions (not a bank owned or short sale) should be considered.
Because of the special requirements of the VA program, be sure to work with a Realtor who is familiar with the program. The Home Seller must also agree to the VA stipulations.
So take a look at this great program. It might make your retirement dreams a reality sooner then you thought possible.