Put money down on a VA loan or use that money for upgrades?

2016-09-18T17:36:36-04:00

So I plan on using my VA loan within the next year, should I save up for a down payment (I know it's not required) or use it for any renovations upgrades and do $0 or a small amount down?

Response by SSG Private RallyPoint Member made Sep 18 at 2016 5:39 PM

2016-09-18T17:39:01-04:00

That's a difficult question and it really depends on a range of factors such as how long you plan on staying in the house, the actual value planned upgrades will add to the house, and how much you need the upgrades.

An extra bedroom for example will likely add enough in value to the home to cover the cost of building that bedroom. A swimming pool on the other hand will liekly add some value to the home, but not nearly as much as it will cost to build unless you are able to do it yourself.

A third option you might consider is going for a 15 or 20 year mortgage. A 300K loan for 30 years at 4% will cost you 176,965.43 in interest. That same 300K loan would only cost you $70,759.64 if you got a 3.5% interest loan and a 15 year mortgage.

Response by SFC Pete Kain made Sep 18 at 2016 6:45 PM

2016-09-18T18:45:45-04:00

Upgrades can wait, Borrow as little as possible.

Response by Sgt Christopher Wenzel made Sep 18 at 2016 8:00 PM

2016-09-18T20:00:22-04:00

Upgrades, you're saving pennies on your monthly payment if you put money down upfront.

Response by CPT Tom Monahan made Sep 18 at 2016 9:08 PM

2016-09-18T21:08:32-04:00

Depends. The key to any loan is to be able to may the payment with no problem. It should not be a stretch on your budget. Now here is the key question. How handy are you. If you are going to pay for renovation why not buy move in ready. The key to renovations is sweat equity. If you can't or don't have time to do a lot of the work buy move in ready. When you watch HGTV, they don't have a real labor rate in their figures. Labor will eat you alive on a renovation. Also, VA is tough on appraisals. They often want to see move in ready.

Response by CPT Private RallyPoint Member made Sep 18 at 2016 10:15 PM

2016-09-18T22:15:44-04:00

go take a look at the funding fees.. VA doesn't have PMI- which is a huge plus. On the downside- the less you put down the higher the funding fee- so in effect you are paying PMI, its just disguised, but I think you can roll the fee into your mortgage- its a bigger factor if you are a reservist (this really irks me because reservist really presents no more underwriting risk) but the fee's are lower if you are AD or prior AD. Best case is you buy the home you want that doesn't need a lot of repair.. or try to get something that will go up in value or that you can rent out later on.. 3 br 2 ba homes are the best for this IMO.

getting money to do home upgrades is not so hard later on with a HELOC, but you will pay more for that money with respect to the rates.

Response by Cpl Justin Goolsby made Sep 22 at 2016 11:04 AM

2016-09-22T11:04:27-04:00

It really all depends on if you anticipate needing to do any renovations or upgrades. When I purchased my home, I made sure all that was taken care of before I closed on my house. The only thing I wasn't worried about was minor stuff which I could handle myself. It really doesn't matter either way, because if you don't use the money on renovations, you can always drop it on a couple extra mortgage payments to pay it off sooner either way. So it depends on your needs.

Response by TSgt Pamela Cleere MRP, SRS, ABR, CRS, GRI, Realtor, RB-22176 made Sep 22 at 2016 7:33 PM

2016-09-22T19:33:09-04:00

Cody, Keep in mind that there are closing cost involved with a VA loan, even though you may be able to roll the closing cost into your loan or take a higher interest rate from the loan company to offset the closing cost. It is always good to speak with a VA loan expert for all the latest updates. Mahalo, Pamela

Response by SSgt Jason Wood made Sep 29 at 2016 3:21 PM

2016-09-29T15:21:36-04:00

Cody,
I'm a mortgage lender licensed nationwide and specialize on VA loans. Depending on the appreciation in your market it may not make sense to wait for the duration of time it will take to accumulate the money you're looking to save for the down payment. As an example if homes are appreciating at a rate of 7% (which is normal) then you need to figure if you can out save what you would otherwise receive in equity through the appreciation. So on a $100,000 home you would earn about $7000 in equity/appreciation in that year time frame. If that is more money than you can save in the same time then it makes sense to buy now. If you can out save that in a year by more than a nominal margin then it would make sense to wait and stash your cash.

If you'd like to brainstorm it more message me here or connect outside. my web is http://www.mylenderjason.com or call [login to see]

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Response by Claire Hellam made Oct 4 at 2016 4:54 PM

2016-10-04T16:54:13-04:00

As a realtor, this question is very difficult to answer. Each situation is different. The great thing is, the VA loan is one of the best loans you can use. Two good reasons to have a down payment is to bring down your monthly loan payments, and to lower your VA funding fee. The house you choose will determine whether you should keep the cash you have to apply it towards renovations and or upgrades. So, I think saving up your money is good in so many ways: down payment, renovations, funding fee, or closing costs. It all depends when you are ready to pull the trigger towards home ownership. Cash can always improve your situation, but the VA is backing you up as a Buyer which will allow you to buy with no-money down. How great is that? Happy House Hunting!