Join Brian Wickert and Tim Holdmann as they guide you through VA loans, how financial advising and mortgage lending intersect, and how not to buy a home during the COVID-19 pandemic.
This week’s highlights:
- Mortgage rates remain low, making now a good (albeit inconvenient) time to buy
- FHA loans aren’t as straightforward as you think — especially with new restrictions
- Trying to pay off your mortgage as quickly as possible? You might want to reconsider.
How not to buy a home during COVID-19
We all know the market is crazy right now — but, with the rates so low, it’s still a great time to buy a home, financially-speaking. That being said, if you’re trying to buy a home right now, there are certain things you just should do. For example, home shopping without a mortgage pre-approval.
A new client called Brian this week ready to buy. She asked about rates and closing costs on her prospective purchase (she was looking to put 20% down on a 6-figure loan). So, the natural next step was to make sure she was pre-approved — and she wasn’t. Unfortunately, this means that, if she finds a home she likes, the odds of an accepted offer aren’t in her favor.
Why? Well, before you get pre-approved, quoted rates are just a guess. Rates depend on multiple factors (like your credit score) which are taken into account during the pre-approval process. This doesn’t give the seller any confidence that you know you can afford the house, making your offer small potatoes compared to someone with a pre-approval.
How the mortgage lenders and financial advisors intersect
Recently, Brian was involved in a webinar put on the Real Wealth Management, a financial advisory firm based in SE Wisconsin. He was there to give financial advisors insight on how COVID-19 is affecting the mortgage world, and explaining how financial advising and mortgages are related.
Basically, four things have gotten more difficult since COVID-19 started:
- Jumbo loans (those amounting over $510,400) are harder to come by, as they are high-risk
- Home equity lines of credit aren’t as easy to get
- Cash-out refinances are difficult (if not impossible)
- FHA and VA loans now require a higher credit score to qualify
The world is changing on a day-by-day basis with no signs of slowing down. This pressure naturally makes people want to get rid of their debts, namely by paying off their mortgage as quickly as possible. However, despite all of the uncertainty, Brian recommends taking your time; Commit to a 30-year fixed-rate mortgage, and invest the leftover money with your advisor. This may seem counterintuitive, but stock prices are low, and if you don’t plan on touching that money for a while, you could come back to a nice chunk of change.
What is a VA loan, and who can get one?
VA loans are loans guaranteed by the United States Department of Veterans Affairs. They’re available to the armed services, both active-duty and retired, and come with some pretty sweet perks.
For starters, you can put 0% down on your home, saving serious money.
Accunet recently had a client looking to relocate to Wisconsin. They’re a veteran, meaning they’re eligible for a VA loan. However, they bought their last house just under a year ago also using a VA loan, and, unfortunately, you can’t have two VA loans open at once. (Well, technically you can, but it’s extremely rare.)
Once this was communicated, the client started brainstorming. Luckily, their dad is well-off, and offered to give them a private mortgage with Accunet refinancing down the road. But, with this strategy, they would have to wait 210 days to refinance the loan, leaving the dad with a substantial loss until January 2021.
So, after working with Accunet, they landed on a new strategy: The father will buy the property and sell it to his son-in-law after he starts his job in August. Luckily, this works perfectly with a VA loan — other loans, not so much.
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