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A Quick Guide to VA Loans
FUTURE COSTS OF HOMEOWNERSHIP
The downpayment, if any, and closing costs are costs you will have when your loan is made. But they
are only the initial costs. You must also be able to pay the future costs from your income,
as follows:
- Mortgage Payments. You will be required to make monthly payments to cover interest and principal on the mortgage. This is the biggest item of monthly expense but is by no means the only one.
- Taxes and Insurance. You will also have to pay future real estate taxes and assessments, and for insurance on the property (that is, insurance that will pay for losses due to fire or other hazards). Usually an amount to cover real estate taxes and insurance will be added to the monthly payment you make to the lender. You should bear in mind that your monthly payment may later be increased if real estate taxes or insurance costs rise. To assure yourself of the accuracy of the tax estimated by the builder or seller of the property, you may wish to discuss this matter with your lender and check with the local taxing authority.
- Heat and Utilities. You will have to pay the heating cost and the utility bills. The amount of your fuel bill will vary, depending upon the climate, how well the house is insulated, etc. Utility bills for electricity, water, gas, and the like will also vary, depending on the extent to which your household uses them. In figuring whether you can afford to pay the expenses on the home you propose to buy, be sure to make adequate allowance for these items. Your lender will be able to help you estimate these costs. It might also be a good idea to check with other homeowners with similar houses in the area.
- Maintenance. Remember that, like everything else, your house will wear out as it gets older. To keep it in a good shape, you will have to pay for the cost of maintenance and repairs. You will have to paint your home every few years. Your heating and electric system will need repairs from time to time; you will have to replace equipment, and so on. An individual sewage disposal system will require care and maintenance. (See here) If yours is a wellbuilt new home, these expenses should not be too large during the first 2 or 3 years, but will rise as your property gets older. You should seek advice from a qualified source as to the probable cost of maintenance, so that you can put aside a small amount each month for future maintenance expenses.
If you are required to become a member of a neighborhood homeowner association, the dues or
periodic assessments payable to the association may be a significant expense item. These homeowner
associations are formed for the purpose of providing maintenance of items such as residence
exteriors, neighborhood recreational facilities, and park and landscaped areas which are part
of the residential development. Typically, these developments consist of apartments, townhouses
or semi detached homes, together with "common areas" deeded to the homeowner association. They
may be called "townhouses on the green," "plannedunit developments," "planned developments,"
"condominiums," "open space communities."
- Other Debts. If you already have other debts such as furniture or automobile payments, or if you will have to buy things for your home on an installment plan, be sure you can afford to meet these payments in addition to the other costs discussed above. Some home buyers run into serious trouble because they burden themselves with too many things for their new home on the installment plan. Don't let yourself be highpressured into buying extras or expensive special equipment. These items may be desirable, but you should buy them only if you can pay for them without straining your ability to pay for your housing and other living expenses.
Before deciding to buy a home, get out your pencil and figure out your total monthly costs.
The financing checklist which follows will help you on this.
There is no fixed rule which can determine how much an individual family can pay for total
monthly housing expenses. It is a problem for each individual family to work out. The main
thing is to make sure that the monthly cost of your home won't strain your budget. Generally,
your lender will be able to advise you whether your income and that of your spouse is high
enough to qualify for a VA loan.
Another good check is to compare the total housing expenses you will have to pay with what you
are now paying for rent or for the house you now own. If the new home you plan to buy or build
will increase the monthly expense above what you are now paying, be doubly certain that you can
pay the increased costs without too much strain.
If you are not sure you can handle the costs involved based on your present and anticipated
income, you should postpone buying a home until you are sure you can carry the total monthly
cost, or buy a less expensive home which you can afford.
A FINANCING CHECKLIST
Add these figures and then compare them to your assets and monthly income:
Downpayment
|
_____________
|
| Closing Costs* |
| VA funding fee |
_____________ |
| Loan origination fee ( I percent of the loan) |
_____________ |
| Discount Points (each point equals 1% of the loan) |
_____________ |
| Title search and examination |
_____________ |
| Various legal fees |
_____________ |
Other charges (credit report, appraisal fee, title insurance, recording fees, survey)
|
_____________
|
| Total Initial Cost |
| Monthly payment on mortgage |
_____________ |
| Monthly payments on taxes and assessments |
_____________ |
Monthly payments on insurance
|
_____________ |
Total Monthly Payment
|
_____________
|
Plus
|
| Probable fuel cost (average per month) |
_____________ |
| Probable monthly utility cost (lights, water, gas, etc.) |
_____________ |
Estimated monthly maintenance and repair expenses
|
_____________
|
| Total Monthly Cost |
_____________ |
*If you don't know these amounts, you can use an average of about
3-1/2 percent of the loan amount plus discount points.
The total monthly cost is the figure you should compare with your weekly or monthly pay. Study
carefully to make sure that you will be able to pay the total monthly cost out of your income
and/or your spouse's income and still have enough to meet all the other items in your family
budget; i.e..
DEDUCT: Total monthly cost from net income (monthly takehome pay)
BALANCE: Is it sufficient for food, clothing, medical care, automobile, monthly payments on
consumer credit accounts, other family expenses, and savings for emergency and future expenses?
FREQUENTLY ASKED QUESTION # 4 [ -more VA Loan questions- ]
- - - - - -
Q: The maximum amount of guarantee the VA will allow on a home loan and maximum loan amounts
A: The maximum guarantee authorized by the VA is 25 percent of the loan amount up to $104,250. The maximum VA home loan is $417,000. The maximum guarantee in the states of HI and AK is 25 percent of the loan amount up to $156,375. The maximum VA home loan in these states is $625,500.
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