Buyers: Take the Leap of Faith & Reap These Benefits

A veteran buyer was looking at looking at some nice homes in Hollister.  There seemed to be a disconnect between their enthusiasm for the homes and making the comment to buy one of them.  It wasn’t that they didn’t qualify.  I had already pre-approved them for much more than they were looking at.  As we talked the light bulb came on!  The transition from their comfortable rent to a significantly higher payment was a quantum leap for them and it was hard to swallow – until…….

I sat them down and shared what many homeowners have learned over the years.  Your accountant can tell you what your new tax liability will be if you buy that tempting home.  In most cases the amount  you will be required to pay in income tax will DROP because of the larger amount paid toward interest and taxes.  Some of us have figured that it is better to reduce our income tax withholding from our paychecks each payday rather than get our refund in a lump sum (with no earned interest) at the end of the year. 

Here is their example:  Sales Price: $650,000; New VA Loan: $591,800; Total Principal, Interest, Taxes and Insurance: $4,210; Income Tax Deduction at a 26% tax bracket: $898/mth; Net “House Payment” after income tax deduction: $3,312. 

Same home, same terms but a house payment that feels like $3,312.  That made the difference.  They will simply need to take a new W4 form to their employers and have them reduce their withholdings by $898 so they will have that much more to take-home each month.  While they still make the actual payment of $4,210 the additional take-home pay makes the leap in house payment more palitable. 

They will break even at the end of the year: they won’t owe much income tax nor will they get much of a refund.  HOWEVER, they will have received their refund during the year to help offset their new, higher payment. 

Everybody was happy and moved forward with what they really wanted to do. 

I love solving problems for people!  Have you done this yet?

VETERANS: Don’t Pay Unnecessary Fees.

Imagine shopping around, from dealer to dealer, for a second car and paying $6,450 for it.  Then, the following week you read on-line that there is a program for a person in your situation where such a car is FREE!  You would not have to pay even $1.00 for that car.  What would you do?  Do you really think that auto dealer is going to refund your money?  Do you think any of them will fess up to not knowing about such a program? 

This is what I deal with often – not in cars but Veteran’s Benefits.  Many so-called VA Lenders fail to ask one simple question of every Veteran. “Do you receive any disability pay from the VA?”  The failure to ask that question costs disabled Vets thousands of dollars unnecessarily.  

Let’s say a Vet buys a $300,000 home and uses their Eligibility for a no-down VA.  If that Vet  receives disability pay, he/she does NOT have to pay the “VA Funding Fee”.  A first time user of their VA Home Loan benefit has a Funding Fee of 2.15% of the VA Loan amount.  So, our $300,000 sales price and VA Loan amount would have a $6,450 Funding Fee as part of the Veteran’s costs.  HOWEVER, if the Lender asks that question and does the proper paperwork for the disabled Vet, the Veteran’s Administration will waive that $6,450 VA Funding Fee.  Good news for the 267,318 disabled CA vets (3,268,045 nationally).

It’s who you know that makes all the difference in the world”.  That is true. But even if your Uncle Bob is an auto dealer, if he doesn’t know that your situation has benefits we have to tweak the slogan: “It’s not just who you know but what they know that counts”.  

Do you know of any such situations?  I’d love to hear from you.

VA Home Loan for a Duplex

I’m surprised how few Veterans know that their VA Home Loan Benefits can apply toward the purchase of a duplex.  In fact, Veterans can also use their ‘VA’ to buy a triplex or fourplex.

I think part of the confusion comes from the blurry lines between a CalVET and Veterans Administration (VA) home loan.  CalVET home loans are for those vets who enlisted while a California resident and are subject to Californians passing  bonds to fund them.   VA Loans are national loans guaranteed by the Veterans Administration.  Unlike CalVET loans Veterans using their VA benefits can use their entitlement over and over again.  VA loans do not expire 25 years after discharge, as CalVET loans do.  VA loans are available to Veterans for their entire life.  And, more to the topic of multiple units, Veterans can use their VA to buy a multiple family residence.

Some important points:

  • Owner occupancy is a standard requirement for VA home loans, including multiple family units.
  • The maximum, no down payment VA loan is currently $417,000.
  • The maximum VA loan amount now is slightly over $1 million.  On those sales prices over $417,000 the vet is required to put down 25% of the difference.  For example, a sales price of $700,000 would require $70,750 down ($700,000 – $417,000 = $283,000 x 25%).
  • You may use 75% of the other unit’s rental income to help qualify for the VA loan.

With today’s low interest rates and lower sales prices now would be an outstanding time for Veterans to buy a home, duplex, triplex, or fourplex.  And…I just happen to know an excellant, VA Direct Lender.  After all, it’s not only what you know but also, who you know.