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    Financially Prepare to Become a Home Owner

    You know you want to own your own house, condominium, or townhome someday, but “someday” is not very specific. How do you know when you’re ready? While the exact answer will differ for everyone, due to the physical and emotional implications of home ownership, a good rule of thumb is to see if you successfully accomplish the following financial goals.

    • Create a budget and stick to it – If you’re the kind of person who saves all their receipts and bills, gather them up and take a good look at where your money is going. If you’re more lax about your financial paper trail, take a few months and track everything you spend. Also keep track of things you purchase and let go to waste, such as groceries or leftovers that go bad before they get eaten, and any funds you put into savings. Compile a comprehensive list of all your recurring expenses, both fixed costs, such as rent, student loan payments, or haircuts, and variable costs, such as groceries, gas, and utility bills. Then compile any occasional expenses – both the fun ones, like birthday gifts, and the not-so-fun ones, like car repairs. Compare your total expenses to your total income for the same period – how much money do you have left over? If you’re satisfied with your current spending-saving situation, that’s good – just make sure you stick to your current patterns. If you’re not satisfied, comb through all your costs and look for ways to tighten things up. Can you pack a lunch for work instead of going to a restaurant every day? Can you get your hair trimmed every three months instead of every six weeks? Whatever you settle on, make sure you can stick to it, and remember: budgets fail more often because they’re unreasonably strict than because they’re too loose.
    • Examine all the military financial benefits available to you – There are a lot of government-sponsored programs designed to help service members and their families save money. Are you contributing to the Thrift Savings Plan, a 401(k) that’s much simpler and more efficient than many civilian retirement funds? Are you able to shop at the commissary and exchange on a military base, rather than spending more at local civilian groceries and department stores? Are you fully utilizing all your healthcare benefits? Don’t be shy about asking if civilian businesses offer military discounts either – some don’t, but the ones that do can certainly add up. All of these options can make noticeable differences in your budget.
    • Corral your debt – While there’s no hard-and-fast rule about how much debt you can have and still get a VA loan, it’s a good idea to aim for a debt-to-income ratio of 41% or less. If you have more debt than that, or certain kinds of particularly damaging debt (collections, for instance), you’re more likely to have to meet additional financial requirements to obtain a loan. Take a look at the debt you have now and choose one or more strategies to decrease it. For example, you could focus on paying off credit cards with the highest interest rates first; transfer balances from high-interest cards to ones with lower interest rates (be mindful of transfer fees, though); or commit to paying more than the minimum required amount on all your bills. Avoid taking on any new debt, co-signing loans with other people, or using short-term lending options, such as payday loans.
    • Research and practice a mortgage payment – Gather pricing information on the kind of home you think you’d like to own in the area where you’d like to live, then look into common interest rates on home loans. If you’re currently paying $750 rent each month but your mortgage payment would likely be $1200, try putting an extra $450 away in your savings each month for several months. If you can live that way without issue, you’re probably in good shape to start the process of obtaining a loan and buying a home. If putting away the extra money is too much of a strain on your current budget, it’s time to reexamine things. You may be able to find additional income and/or make additional cuts to your budget, or you may decide instead to set your sights on a cheaper home or a different residential area.

    There’s no doubt that good financial habits require intentional design and discipline, but there’s also no doubt that being able to achieve your goals in life makes all the hard work and self-control worth it in the end. If you’re ready to achieve your goal of owning a home, or if you’re still unsure but have important questions, Fortress VA Loans is here for you. Our family of VA loan specialists and lenders is committed to giving back to American service men and women by making the VA loan process as simple and painless as possible. Wait no more – contact us today!

    Why Does the VA Require Home Owners Insurance?

    Although first-time home buyers may not realize it at first, any reputable mortgage lender will require them to take out a home owner’ insurance policy (sometimes also known as hazard insurance) on their new home. All VA-approved lenders enforce this requirement. Although it may seem like you’re already having to pay a bundle for the principal and interest on your home, and insurance is just adding insult to injury, there are solid, logical reasons for the home insurance requirement.

    Home owners insurance may not seem very important when you’re not using it, but if disaster strikes and causes major damage, you’ll certain see its value then. Imagine a huge fire starting in your new home and damaging a large portion of the structure and your possessions inside. If you didn’t have insurance, you would simply have lost the many hundreds or thousands of dollars you had invested in all of those belongings. And since your lender technically owns at least a portion of your home until you’ve completely paid off your mortgage, they would also have seen a large investment go up in smoke – literally. However, with an insurance policy in place, you’ll be reimbursed for at least part of the cost of everything that was damaged, and your lender will be compensated for their loss as well.

    So what does home owners insurance cover? Plans can range from simple to complicated and general to specific, but they will nearly always include:

    • The structure of the home – If a fire, tornado, or hurricane (or other disasters spelled out in your policy) strike your home, your insurance company will pay for your home to be repaired or even rebuilt. The actual dollar amount of guaranteed coverage will depend on how much your home is worth – so if your home is worth $250,000, your insurance company (logically) won’t pay more than that for repairs.
    • Your personal belongings – Most of your possessions, including furniture, clothes, electronics, and appliances, will be covered in the event of one of the above-named disasters. However, most policies only insure belongings for 50% to 70% of the amount insured for the structure. So if you have $250,000 of coverage for the structure of your home, the amount you receive to repair or replace the stuff in the home will not exceed $175,000 for 70% insurance.
    • Additional living expenses – If you have to live away from home during repairs from a covered disaster, your insurance policy will cover certain associated expenses, such as hotel rooms and restaurant meals. There is no set amount for this coverage; it varies from policy to policy.
    • Personal liability – If you, a family member covered on your policy, or your pet injures someone else or damages their property, their legal and/or medical expenses will be covered by your home owners policy. Generally, about $100,000 is alotted for this coverage, but you can purchase more if you choose.

    The breadth of your coverage can be affected by whether your policy covers only the depreciated cost of your home and possessions, their full replacement cost, or the full replacement cost of your home with added protections against inflation. If you live in an area that’s likely to be affected by flooding or earthquakes, you’ll probably also be required to purchase flood or earthquake insurance, because these disasters are not covered under regular home insurance policies.

    Depending on your circumstances, you may need to purchase additional coverage as a requirement for a VA mortgage if you’re going to be absent from your home for a while due to deployment or other military service. Many home owners policies include a “vacancy clause” stating that insurance coverage does not apply if the home has been vacant for a certain length of time (sixty days or more, perhaps), so you might need an endorsement to counteract such a clause.

    When it’s time to purchase a home insurance policy, your lender can suggest a list of companies that cover property in your area, or you can do your own research. In any case, it’s best to shop around. Get quotes from several insurance companies, and pay close attention to the specific situations each policy will and will not cover. Also be sure to look at customer reviews for each company to get a sense of their reputations and what their processes are for dealing with emergency situations. Once you’ve secured an insurance policy, you’ll need to show proof to your lender so the loan process can keep moving.

    The family of VA loan specialists and lenders at Fortress VA Loans knows that home owners’ insurance is just one of the many topics our clients may have questions about. Whatever questions or concerns you have about obtaining a VA loan, we’ll be glad to discuss them with you. Contact us right away – don’t delay!

    What Is Escrow?

    If you’ve never bought a home before, “escrow” may be a new word to you. Even if you’ve heard the term before, you may find it scary or think it’s a bad thing; these tend to be common perceptions among people who don’t fully understand what escrow is or why it’s necessary. Basically, escrow occurs when an amount of money is held by a neutral third party for a certain amount of time, essentially leaving the funds in limbo until some event occurs. During the home-buying process, you will likely have two different amounts of money in escrow for two different reasons: one relates to your transaction with the seller, and the other relates to your home owners insurance and property tax payments.

    When you’re ready to make an offer on a house, you’ll probably want to also offer an earnest money deposit, occasionally known as a good-faith payment. This is a standard part of nearly all real-estate transactions, including those involving VA lenders. An earnest money deposit indicates to the seller that your offer is serious and you’re not still looking at a bunch of other homes, and it may give the seller an incentive to make certain concessions in your favor. Once you enter into a purchase agreement and you write the check for your earnest money deposit, that sum is placed in an escrow account with an escrow company that you and the seller have agreed upon. The company safeguards the money until your real-estate transaction is completely finished – neither you nor the seller can touch the money until the time is right. (In certain locations, an attorney will be used, rather than an escrow company.)

    Keeping the money in escrow offers assurance for all parties. If you change your mind about purchasing the home for an unapproved reason, the seller will get to keep your earnest money deposit – it’s essentially compensation for them if you cause the deal to fall through. But if the seller pulls out of the transaction unexpectedly, or if you have to pull out of the deal for a reason that’s okayed by your contract, you’ll get your deposit back. Approved contingencies for the buyer to end the transaction might include:

    • A major defect is discovered during an inspection of the property
    • The appraised value of the new home ends up being less than the purchase offer (this is a contingency for every VA purchase loan)
    • You are unable to obtain financing in time to purchase the home by the agreed-upon date
    • The deal to sell your current home falls through, leaving you unable to purchase the new home by the agreed-upon date

    Usually, once everything is finalized, the earnest money deposit on a conventional loan will be applied to the buyer’s down payment or closing costs. Since VA loans don’t require down payments and sellers in these transactions may pay up to 4% of the value of the loan in concessions, which will likely cover your closing costs, the earnest money deposit on a VA loan deal will either be returned to you or be applied to any portion of your closing costs not paid by the seller. (Note: the act of closing on a home may sometimes be referred to as “escrow,” because that’s when your earnest money deposit comes out of escrow.)

    The other escrow situation will likely occur at the request of your VA mortgage lender. It is in the lender’s best interest that you purchase home owners insurance to protect their investment in the event of a disaster and that you pay your property taxes regularly – otherwise the local government can take your home away, and the lender will, again, lose out on their investment. (Note that some states discount or waive property taxes for disabled veterans who meet certain criteria.) As part of your closing costs, your lender will likely require you to deposit money in an escrow account to ensure that you have enough funds to cover your home insurance and property tax payments. There are limits on how much you can be required to deposit; common figures are fifteen months’ worth of insurance payments and three months’ worth of property taxes. When your payments are due, the escrow company will transfer the correct funds to the appropriate recipients.

    On VA loans, of course, sellers often pay the buyer’s closing costs, so your seller may cover your up-front escrow for insurance and taxes for you.

    The family of VA loan specialists and lenders at Fortress VA Loans knows that all the various aspects of the home-buying process can add up to be quite overwhelming, especially for first-time home buyers. That’s why we work so hard to make things as simple as possible for you. If you still have questions about escrow or any other facet of VA loans procedures, we’ll be very happy to discuss everything with you in detail!

    Grants for Disabled Veterans to Make Their Homes Accessible

    While it would be shortsighted and illogical to say that the sacrifices made by one military member and their family are greater or more important than those made by any other service member, it’s certainly true that some people leave military service with greater physical challenges to overcome than others. For veterans whose service to our county leaves them permanently, severely, or totally disabled, merely re-learning how to take care of themselves and finding ways to do formerly simple tasks can be completely overwhelming. If their homes are not well suited to getting around with a wheelchair, cane, prosthetic, or other device, adjusting to civilian life can seem utterly hopeless.

    Fortunately, the Department of Veterans Affairs offers several grants to aid disabled veterans and their caretakers in making the necessary modifications to create workable, liveable home environments that provide disabled service members as much safety and independence as possible. Depending on the particulars of the disability and the home that needs to be modified, disabled veterans may be eligible to receive one of the following VA grants.

    Home Improvement and Structural Alteration (HISA)
    HISA grants provide financial resources for improving mobility and access in a disabled veteran’s place of residence. The disability does not have to be related to your military service. Improvements covered by HISA include:

    • Modifying entrances and exits in the home
    • Improving access to essential bathroom facilities
    • Lowering bathroom and kitchen sinks and counters
    • Improving sidewalks, driveways, and paths in the immediate area of the home, including building wheelchair ramps
    • Adapting plubming and electrical systems to accommodate medical equipment

    If you have a service-connected disability rating of 50% or greater, you may be eligible for HISA grants up to a lifetime limit of $6,800. If you have a non-service connected disablility, you may be eligible for grants up to a lifetime limit of $2,000. In order to apply for a HISA grant, you must submit a prescription written or approved by a VA physician detailing the medical conditions that make the proposed improvements necessary; a completed VA form 10-0103; a written, itemized list of all costs associated with the proposed improvements; and a color photograph of each area that needs to be modified. HISA can be used for rental properties as long as a signed, notarized statement of approval from the property’s owner is also submitted. The Department of Veterans Affairs may require an inspection of the site before approving or denying a grant.

    Specially Adapted Housing (SAH)
    SAH grants can only be used if your disability is permanent, total, and service-connected. To be eligible, you must have experienced one or more of the following:

    • Loss or loss of use of both arms and/or both legs
    • Loss or loss of use of one or both legs in service on or after September 11, 2001, to the extent that you require braces, crutches, canes, or a wheelchair to balance and move around
    • Blindness or near blindness (light perception only) in both eyes
    • Certain severe burn injuries
    • Certain severe respiratory injuries

    These funds help disabled veterans live independently and without barriers. You can use SAH grants to purchase land and build a specially adapted home on it, to build a specially adapted home on land that is already owned, or remodel an existing home if it can be suitably adapted. You can also apply them to the unpaid principal mortgage balance of a specially adapted home that was purchased without the assistance of a VA grant.

    Special Housing Adaptation (SHA)
    Like SAH grants, SHA grants can only be used by veterans with permanent, total, service-connected disabilities. These are the conditions that will make you eligible for an SHA grant:

    • Blindness in both eyes (20/200 vision or less)
    • Loss of or loss of use of both hands
    • Certain severe burn injuries
    • Certain severe respiratory injuries

    You do not have to live independently to receive an SHA grant; you may live in a home owned by a family member. These funds may be used to adapt a home you or a family member already owns, to adapt a home that you or a family member intend to purchase, or to purchase a home that has already been adapted to meet your needs.

    Special adaptations covered by a SAH and SHA grants include:

    • Making bathrooms, kitchens, and bedrooms more accessible
    • Modifying doors, windows, and floors
    • Installing covered porches, walkways, and ramps
    • Widening hallways, carports, and garages
    • Pouring concrete or asphalt walkways outside the home
    • Installing sliding doors, grab bars, and handrails
    • Installing certain security features

    Both SAH and SHA grants can only be used for a disabled veteran’s primary residence. You can receive up to three grants for your permanent home, up to the total lifetime caps, which are $77,307 for SAH grants and $15,462 for SHA grants (both numbers apply to fiscal year 2017). If you will be temporarily living with a family member whose home needs to be adapted for your disabilities, you may be eligible for an SAH grant up to $33,937 or an SHA grant up to $6,059. If you qualify for both SAH and SHA grants, you may only use one (generally SAH, since the dollar amount is higher).

    Depending on your individual needs, you may be able to use a grant for disabled service personnel in conjunction with a VA home loan, or you may be able to receive such a grant even if you are unable to secure a VA home loan. To discuss all the possibilites, contact the Fortress VA Loans family of VA loan specialists and lenders today. We’ll evaluate your needs, inform you of all your options, and help you secure the home that works best for your future goals.