Saturday, March 22, 2014
March 21 - Online Discussion Question 2
Lisa has finished her Iraq tour, landed stateside, and is getting married soon. Together, they bring home $3,500 a month, and they think they deserve a home of their own. They can get a VA loan, 30-year fixed, at $1,650 a month principle and interest, no down payment. If they are super careful they can do it, and the equity will only go up. You were discharged two years ago, and you did the same thing. It was a mistake, and it will be a mistake in their case, too. Talk them out of it.
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First of all, they need to get a 15-year fixed-rate mortgage instead of a 30-year fixed-rate mortgage because although the payments will be more, in the long run, they'll save a lot. Also, getting a VA loan is not the best way to go. It appears to be the wise choice because no down payment is required, but in the long run, you'll have more fees/interest and you'll end up spending a larger amount of money. I would advise them to rent somewhere until they can save 10% for a down payment and then get a 15-year fixed-rate mortgage with payments that are no more than 25% of your monthly income.
ReplyDeleteA VA loan isn't the best because even though no down payment is required, they'll have a lot of fees and interest later on which will cost them more. They need a 15-year fixed-rate mortgage instead of a 30-year because it will save a significant amount of money in the long run and they should rent for a while until they have enough money to put down 10% on a home of their own. Then they should take out a 15-year fixed-rate mortgage.
ReplyDeleterent for a while first while you save up for a sizable down payment, get a conventional 15yr fixed rate mortgage, total payments shouldn't exceed 25% of your income
ReplyDeletetravis
A VA loan isn't the right choice. If you have a good down payment, then the conventional loan will be a much better deal. The VA loan will stick you with high fees and interest rates.
ReplyDeleteAutumn
VA Loan is okay, but even then, conventional is the way to go. You might need a better payment before diving into a home with a mortgage and such, they should be waiting until they have more cash for they're down payment.
ReplyDeleteA VA loan isn't a good choice even if no down payment is required, in the end they will have a lot of fees and interest which will cost them more. They need a 15-year fixed-rate mortgage, not a 30-year because it will save them more money in the long run. They should also rent for a while until they have enough money to put down 10% on a home of their own.
ReplyDeleteVA Loan is okay, but the conventional loan is the best. You might need a better payment before purchasing a home with a mortgage, they should wait until they have more money for their down payment.
ReplyDeleteDon't get the VA loan, it's not worth it. It may look great since it's zero down but it will cost you more later. They should probably just rent for now so that they can have a good down payment when they do buy a house.
ReplyDeleteeyezik
VA loans have hidden fees and interest and so it isnt as wise a decision as the conventional loan. They should rent and save up a good down payment and get the 15 yr loan.
ReplyDeleteI would tell them that I had done this two years ago and was ripped off because of it. The VA loan is to good to be true and it is fake. The zero down idea just covers for the fact that there is a higher interest.
ReplyDeleteAdam
Can't say it any better than that…. :D
ReplyDeleteI would tell them that I had done this and that it was a huge mistake. Then, I would lay out why. VA loans are supposed to help veterans, but they don't. Zero percent down on a house is a bad idea in itself, since it just puts you deeper in debt. I could encourage Lisa to save up her money for at least a 10% down payment. A 30 year mortgage does reduce monthly payments greatly, but the down side is that you're in debt for a long time and you will actually pay way more than if you went for the 15 year. The fixed rate is great, since there is less risk for the borrower. The monthly payment that Lisa faces is almost 50% of her total income, and this is bad. If part of that income disappeared, she would be in trouble. I would encourage her to look for a conventional mortgage that would be less than 25% of her monthly income.
ReplyDelete