How important is it to have your California VA mortgage financing figured out before you have an offer to buy a home accepted? I would say it is Super Important. There are a lot of moving parts when it comes to buying a home, especially with regards to the financing. If the financing does not work out then the deal will fall apart, resulting in a loss of time and money for all parties involved in the home purchase. Which is why getting PreApproved for a VA home loan prior to even beginning to make purchase offers is critical if you intend to have a smooth transaction. This is just as important for California first time home buyers as it is for the move up home buyers.
A California Veteran Home Buyer Should Know These Things Before Shopping for a Home
- What makes up a “mortgage” payment? Many mortgage calculators found on websites only list the principal and interest portion of the payment. But what about the property taxes, home owners insurance, mortgage insurance (if needed), home owners association dues, etc. A home buyer trying to getting an estimate of the mortgage on a $400,000 VA loan at 4.25% ($400,000 purchase price) may just see a payment of $1,967. But using a typical factor of 1.25% for property taxes, the monthly taxes will be $416. And home owners insurance, using a factor of .3%, would be $100 per month. And with a VA loan, an impound account for taxes and insurance is required, meaning the actual monthly mortgage payment, including principal, interest, taxes, and insurance would be $2,484. That extra $500 in payment could be a real if the home buyer already had an accepted offer.
- What mortgage payment are they truly comfortable with? The home buyer should create a budget in order to make sure they can truly afford the mortgage payment. And they should also think about things that are outside of the mortgage payment, especially in the first year of their home purchase. Things like new furnishings, appliances, paint, etc. Also, there are maintenance costs for a home that should be considered in the budget.
- How much money will be needed to close escrow? Sometimes California Veterans using the VA home loan program automatically assume that since they will not need a down payment then they won;t need any funds to buy a home. While it is possible to buy a home with VA financing and not need any funds for closing, commonly referred to as a VA No No, this is not something that is automatic. There are still closing costs that need to be dealt with. A California VA Loan officer can provide custom detailed loan scenarios which will give a complete breakdown of the estimated closing costs and prepaid expenses that would either need to be paid by the buyer, seller, or through a lender credit (if going for a VA No No).
- What comprises the closing costs and what are “prepaid expenses”? Closing costs are made up of costs involved in the purchase of the home and are one time items. There lender fees, inspections, the appraisal, escrow closing fees, notary, county recording fees, title charges, home owners association transfer fees, credit report fees, etc. It is important to get an accurate estimate of these costs during the planning stages of buying a home. As a home buyer, finding out you are short to close by $3,000 is not a good feeling when you are already in escrow to buy a home. And what about “prepaid expenses?” These are “recurring” items, including mortgage interest (prepaid interest), property taxes, and insurance. An impound account will need to be set up on a VA home loan for taxes and insurance. The number of months of property taxes that will be initially deposited into the impound account depends on what month the loan is to close. At certain times of the year it may be just 2 or 3 months. But at other times of the year it could be 8 or 9 months. On a $400,000 purchase, this could be a difference in funds to close of over $2,000.
VA Loan PreApproval Answers Questions the Buyer Needs to Know
By working with a California VA loan officer at the very beginning of the home shopping process the Veteran will get the answers to questions that they need to know. And learn things that they didn’t even realize they needed to know. And of course in the current real estate market, most sellers and their listing agents will not even entertain an offer from a buyer who doesn’t have a VA loan PreApproval letter in hand. Some lenders will charge a fee for PreApproval, but there are plenty of reputable VA lenders who will do a PreApproval for free. And depending on the complexity of the loan package, PreApproval can be completed anywhere from 24 hours to a week. The first step is a quick email or call to an experienced California VA loan officer.
Authored by Tim Storm, a California VA Loan Officer specializing in VA Loans. MLO 223456. – Please contact my office at the Home Point Financial. My direct line is 949-640-3102. I will prepare custom VA loan scenarios which will be matched up to your financial goals, both long and short term. I also prepare a Video Explanation of the your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.