Doing anything for the first time can be a bit unsettling. And depending upon the activity, there will always be a unique combination of anticipation, excitement and anxiety. Itís the unknown that accounts for those emotions. For those thinking about buying their first home and using their VA home loan benefit, the unknown presents the same set of feelings. How do you know if youíre ready to buy a home and finance it with a VA mortgage?
Testing the Waters
Until youíre really thinking about buying your first home, all the amount of advice goes largely unnoticed. Buying a home isnít on your radar so you donít pay attention to any of the reasons why itís a good thing to buy a home. Besides, werenít we just witness to a major housing crisis in this country? Who wants to be a part of that, anyway?
Actually, no one does. But to VAís credit, VA borrowers had nothing to do with the housing bubble, toxic loans and unscrupulous lenders. VA loans are the highest performing mortgage of any in the market today.
But if you start to pay attention to real estate or home buying but youíre not exactly sure why, what are some of the signs that youíre moving closer to buying your first home and use your VA loan benefit?
One of the early signs might be hearing someone else at work talk about their own home buying scenario. A co-worker who is buying a home will be almost consumed by the process, talking about the home they just put a deposit on, how excited they are and when theyíre closing. You might think, ďIf they can buy a home, then why canít I?Ē Friends and co-workers buying a home will spark your own interest.
Once you get that spark, you might test the waters, harmlessly of course, on your own and log onto a real estate website that lists properties for sale. At this stage, it starts to get a little intimidating when you see how much homes sell for. Who has $300,000 to pay for a house? But thatís what VA loans are for, you get to spread the payment out over as much as 30 years. So you find a mortgage calculator and find out that a principal and interest payment on a $300,000 loan is under $1,500 using a 30 year fixed rate loan at 4.00 percent and less than $1,800 when you include property taxes and insurance.
You then compare that payment with what youíre paying in rent. If you see that your rent is comparable to what you pay in rent, then youíll start to wonder why you donít buy a home. And now that you know that your rent is nearly the same as a house payment, you start to wonder why youíre paying the mortgage for your landlord. Youíre paying the rent and the landlord uses the money to make the mortgage payment plus puts some extra in the bank. Why throw money away, right?
The Tax Question
Oh, and who can forget the tax benefits of owning and financing a home? No doubt youíve heard that mortgage interest is tax deductible. But what does that mean, really? It means you pay less income tax, thatís what.
Letís say that you $6,000 per month, or $72,000 per year. Using the same example as above, during the first year, you will have paid $11,903 in mortgage interest. Yet when it comes time to file your federal income tax returns, instead of paying income tax based upon $72,000 per year, $11,903 will be deducted from your adjusted gross income for tax purposes. Youíre paying tax on less income.
When you rent, youíre throwing that money away. If youíve gotten this far to satisfy your curiosity of buying your first home, youíre almost there.
Your VA Loan Officer
Itís finally gotten to you. You have to take the next step so you call a loan officer and say, ďHey, Iím thinking of buying my first home, can you help me?Ē
Your loan officer will walk you through the home buying process, calculate how much you may qualify for and discuss approval requirements, loan choices and how much, if any, youíll need to provide at the closing table.
Youíve essentially come full circle. What started out as nothing more than a co-workerís story has gotten you to the point where youíre ready to buy. Congratulations, youíre on your way to your very first home!