A few days ago I wrote about the stellar performance of what I believe to be the best loan program on the planet: the VA home loan. This is a loan for 100% of the appraised value of the property, with no mortgage insurance. That means that someone who has served in the U.S. military can buy a home at today’s great prices, with crazy-low interest rates. How crazy-low? Well, as of this morning’s rate sheet, a veteran buyer who selects a rate of 4.25% will receive a rebate from the lender of close to 2% of the loan amount. For a purchase of $300,000, that would more than pay closing costs, so that buyer would own that house literally for no cash out of pocket.
The absence of mortgage insurance is a big deal, too: an FHA loan, which requires 3.5% down, would carry mortgage insurance of nearly $300/mo. So a veteran buyer would get that $300,000 home for no money out of pocket and a monthly payment of around $1,850/mo–less than renting the same property.
How could anyone improve on that? Easy; VA imposes a one-time fee, called a Funding Fee, on the buyer. It amounts to 2.15% of the loan amount for first-time use. Beginning with loans closed after October 1 of this year, the Funding Fee will drop to 1.65%–quite a change.
THAT, my friends, is how to say thank you to the brave men and women who have served our country in the military.