I am looking for some input on deciding whether to wait for my elegibility on the VA loan or to proceed with a conventional loan. I am currently living in California where the housing market seems to be booming. I serve in the Air Force Reserve so my eligibility wont kick in until my full term is up in July of 2017. I understand that the VA loan is a great option and has many attractions. However, I am wondering if it would be worth waiting 2.5 years or if it would be more beneficial to enter the housing market now. If i were to move forward with a conventional loan now, I would be comfortable putting down 10%. I know that PMI will be a factor with this decision. Most starter houses in this area will be in the 500-600k range. Please let me know if there is any way you could put the time lost waiting for the VA loan into persepctive. Any input is appreciated!
I consulted an expert in this area and here is what he had to say:
You would need a crystal ball to fully answer this question. There are a lot of factors to consider. Let’s start with the VA funding fee. First time use of Reserves eligibility with a 10% down payment results in a VA funding fee of 1.5% of the loan amount. If we use the $500-600k price range, the fee will be $6750 - $8100. While VA rates tend to be lower than conventional if you were to consider paying points on a conventional loan, you may find yourself at the same rate with less fee. Evaluating the VA funding fee versus PMI would be accomplished by taking the monthly PMI amount and consider the amount of months it will be in effect prior to dropping off once enough equity is in place. The biggest “X” factor is the fact that there is no way of determining rate levels 2 years from now with any certainty. Markets affecting mortgage rates can be volatile. This is a great conversation to have with your financial advisor.
I hope this helped answer your questions! Good luck on your home buying journey! I encourage you to contact our team of financial advisors here at USAA. They can be reached at 800-771-9960 and will be able to help you assess your options and see if we might be able to help.