Quite possibly the best features of a VA home mortgage or FHA loan is not their small down payment or "zero down" with VA, or the higher debt ratios allowed than typical home loans. It is the fact that these loans are assumable. This is a extremely positive for the fact that 5 to 10 years into the future, mortgage rates should be mostly higher. Almost every world financial expert including our own federal reserve chairman, Benjamin Bernanke knows inflation will lurking its head higher especially once the economy starts advancing. It is simple math. Would you rather have a mortgage loan at 5% fixed or the market's 8% to 9% fixed rate in the future?
So, if you are not one of the lucky ones to get in on low mortgage rates in today's buyers market then you can potentially still get the same low rate in five to ten years from buying a home from a seller who has an FHA or VA loan. As an example of today's rates, there are builder homes being sold at steep discounts in Arizona. The TV commercial showed a 30 year fixed rate at 3.875%. That is unheard of. If you miss the boat due to having bad credit, maybe due to an unfortunate short sale it is still possible down the road.
As a homeowner, this really is a great tool when trying to sell your home in a few years. Inflation means an increase in your home value. The professional real estate agents can separate themselves from the part-timers and uninformed through their knowledge of mortgage financing. Anxious first-time home buyers will appreciate that an agent is letting them know of potential ways to sell their home quicker. Although the attractive low rate FHA loan is assumable, the buyer will still have to get an additional loan to make up the difference. As an example, the seller paid $100,000 for their house with a $96,000 FHA mortgage. He wants to sell 5 to 7 years from now for the market value of $150,000. The buyer will assume the $93,000 loan (it was $96,000 initially) but still have to secure financing for the difference or come up with cash. So, although it is assumable there are additional solutions to consider.
Here are a few disclosures that must be mentioned:
"The original borrower (the seller) is "still responsible" during the first five years of the mortgage; if the new borrower (the buyer) makes late payments, the buyer and seller each have their credit damaged. And one of the top derogataries on your credit is a mortgage late after foreclosure and bankruptcy.
"FHA loans require the borrower to have mortgage insurance; this is approximately 0.50% each year. In comparison, a 5% fixed rate FHA loan, which is really 5.5%, is far better than a 9.625% the market's mortgage rate.
"Permitting a veteran to assume a VA home loan freezes the selling veteran's eligibility for a new VA loan.
As with most things in government it is not perfect but it is better than what rates will be in 5-10 years.
Ray Heinson is an investor in real estate and suggest these resources for
FHA Mortgage Loanss and to find
FHA Streamline Mortgage Refinancing from trusted lenders in your area.
