Rob Stretch is the founder of VAbenefitblog.com, a new blog that keeps veterans aware of their benefits. Follow us on Twitter also @vabenefitblog.
One surefire way to save plenty of money on a mortgage is to take advantage of one of the three government-sponsored mortgage options, whether it’s a VA loan for veterans and active duty service members, an FHA loan for first time homebuyers, or a USDA loan for lower income individuals.
One key advantage to these programs over traditional mortgages is their flexibility and their financing terms. VA, FHA, and USDA loans all have a variety of down low payment options, and the VA and USDA programs provide zero down payment options as well. Each program also provides the ability to roll closing costs into the loan. These concessions spell good news for your budget and you can avoid having to save large amounts of money for your closing date, which can often be a stumbling block for many potential homebuyers.
It’s worth noting also that each government loan has very stringent requirements regarding how much of your income can go to your new mortgage. The limits are designed to protect buyers and not allow them to take on too much of a mortgage payment for their income. Each program permits a maximum of 29% of the borrower’s income to go to the mortgage (a total of 41% of the borrower’s income can go to the mortgage and additional debt). This information can be helpful for your budget and can give you a good idea of how much of your income can go to other places and how much needs to be reserved for housing. (Unless you have a high net worth balance sheet, in which case, you likely wouldn’t qualify anyways.)
As with any other large purchase, review your budget for several months before making the decision about your home loan. Consider using computer-based budgeting software that has the ability to break your spending into categories – this will help you see where your money is actually going and can help you pinpoint places that you can reduce your spending. Ensuring that you have the funds each and every month to make your new mortgage payment will make the whole process pain-free and pleasant instead of stressful, and can also give you great insight into your financial goals. Thankfully, government-sponsored loan programs can help you work towards these goals by saving you considerable amounts of money throughout the life of your loan and are a great choice for budget conscious families.
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