808 Oahu Realtor (Ryan Riggins) License #RS-74740

Our way of spreading the word with Real Estate News


Leave a comment

PCSing to Hawaii, Should I Buy a Home in Hawaii?

/in 

Part of military life is the high percentage of receiving your permanent change of station orders.  This is also called PCS orders for short.  PCS is the military version of a job relocation over 50 miles away.  At least a benefit is that the military will pay for the move in these cases.  Typically, military families are given 2 – 3 months notice of the duty station change.  In order to have a smooth PCS transition, start planning and acting immediately.

After PCS Orders, 3 Decisions to Buy a New Home

For the end result of buying a new home, there are important decisions to make.  First of all, what should you do with the current home?  Renting or selling the home will affect the new home purchase in several ways, but either could work.  Next, is to choose an experienced Realtor local to the new duty station.  It is very helpful to work with a real estate agent who is experienced in the military PCSing process.  Finally and equally as important, is to choose a VA mortgage lender experienced in the PCS process and the VA loan options available for every scenario.  So let us help in explaining the VA loan options for PCS’d service members, plus how these options work.

Should I Rent Out or Sell My Home After Receiving PCS Orders?

Service members need to make some key decisions within a short timeframe after receiving PCS orders.  Often to purchase another property, buyers need to rent or sell the current home.  In order to make this decision, there are several factors to consider.

  1. Is there equity in my home so I can sell it?
  2. How quickly can my home sell?
  3. If bringing money to the sale, can I do it?
  4. Do I want to be a landlord?
  5. How does renting or selling my home affect buying a new home?

While making the decision to sell, it is paramount to choose a listing agent that is familiar with this PCS process.  Additionally, look for real numbers on your house.  A reputable Realtor will show you documentation to back up a listing price, plus expected sales turnaround.  Of course, not all markets support a fast closing.  Plus, there may not be enough equity in the home to sell.  One of the worst things would be to plan on selling at a certain figure to find out in a few weeks, there must be a drastic price reduction.

If selling is not an option because of a slow market or limited equity, renting could work.  Maybe the rental market is strong for the area and becoming a landlord fits the military family’s goals.  Check out a recent article “How to get into real estate investing and build wealth“.  The article discusses potential for starting a real estate portfolio.

Conversation with your VA Loan Officer

Lastly, speak to your mortgage loan officer for the new purchase.  Thoroughly discuss how renting or selling the current home affects the VA entitlement and VA loan qualification.  VA will allow 100% of the new contract rent payment to offset the mortgage payment inclusive of principal, interest, taxes, and insurance.  This could help a service member use VA again to buy a home, which we discuss in more detail below.

Choosing a Real Estate Agent at the New Duty Station

Beginning the home buying process from afar is tough.  Plus it takes a lot of trust and nerves.  Starting the process by looking at pictures online but not knowing anything about the area is difficult.  So that is where a local, experienced real estate agent needs to be your eyes and your guide!  Begin with creating a list of your wants, needs, and a budget.  Next, interview agents in the new PCS’d area and see which one exceeds the others in your opinion.  Relay your list to the agents and once the Realtor is chosen, the agent should start sending houses which meet your criteria.  Because of the relocation situation, Realtors in these cases are depended on more than a traditional purchase.  This is especially important on a fast moving market as the buyers may go under contract without even seeing the house in person.  Talk about trust!  That’s why choosing an agent that is experienced and fully understands your family’s needs is so important.

Keep in mind that a buyers agent will require a prequalification letter from a reputable lender.  Plus it is very important for the buyers agent to have a detailed discussion with the loan officer.  The agent, loan officer, and buyer will have thorough discussions to organize a plan.  Part of this plan is deciding on VA loan options to meet the overall goals and path of the prior home.  So let’s discuss those.

VA Home Loan Options After PCS Orders

Luckily military families have access to probably the best mortgage loan type available.  Because of the no money down option and no monthly mortgage insurance, it is a very attractive option.  But often it is not as easy as “Just give me the VA loan option”.  Especially in the case of a PCS scenario as there is usually another property in the mix.  How much the prior home rents or sells for plays a huge role in the new VA approval.

How to Use a VA Loan While Renting Out Prior Home

One of the first questions an experienced VA loan officer will ask would be the plan for the current home.  In this case, if the home will be rented, VA treats this very favorably for the buyer.  Let’s say the current home has no equity and the total mortgage payment is $1000 per month.  Then if the PCS’d family rents out the current home for $1000, VA considers the payment covered.  We would not have to count a payment in a VA buyer’s debt ratio or residual income.  Therefore, it is much easier to qualify.

But if the current home has a VA loan on it, then a portion of the Veteran’s entitlement will be tied up.  Don’t worry though, because many are still able to purchase with no money down up to a certain amount.  The amount depends on the basis and bonus entitlement available.  Learn more about how VA Entitlement works which is displayed on the Certificate of Eligibility.  Plus we will request the COE for the buyer which is usually obtained online within a few minutes.

Renting Current Home and Using Another VA Loan

Many do not realize that it is very possible to have 2 VA loans at once.  So renting out the current home and having two VA loans at once could be done.  Having two VA loans at once requires accessing the buyer’s bonus entitlement or 2nd Tier entitlement.  Basically if the prior VA loan will not be satisfied prior to the new closing, part of the Veteran’s entitlement is tied up.  Therefore, a VA lender would use a calculation to determine the total entitlement available for the new purchase.  The entitlement and the purchase price will determine the amount of down payment if any at all.  Check out another article to learn more called, “Rent your current home and buy your dream home with no money down“.  Keep in mind this is for the conversion of a primary to a rental.  Once a home has already been a rental property for a bit, the tax return numbers must be used.

Selling Current Home and Using VA Loan on New Home

What if the current home is sold?  This will at least free up the VA entitlement towards the new purchase.  Keep in mind that both the sale and the purchase can happen on the same day.  Our underwriters would verify the eligibility would be freed up by the simultaneous sale.  But what if the PCS orders came not long after buying the prior home?  The family may have to bring some money to closing or maybe breaks even.  Again, at least VA offers a no money down option.

Using Seller Paid Costs and Sales Concessions After Receiving PCS Orders

Unlike other mortgage loans, VA allows the seller to pay all reasonable closing costs without setting a percentage limit.  In addition, VA will allow for the seller to pay up to 4% of the sales price towards sales concessions.  If buying after receiving PCS orders, there could be a creative strategy to help the closing happen.  The buyer may lack funds for some painting that needs to be done.  Maybe the buyer needs to pay off a debt in order to qualify or just feel comfortable enough to buy the new home.  That is where a knowledgeable realtor and lender, plus a willing seller could help make a closing happen for everyone.  Learn more about using sales concessions creatively here.

Additional Benefits of a VA Home Loan

  • Loans up to $1,000,000
  • Higher debt ratios allowed to 55%
  • 600 minimum credit score
  • Seller may pay all closing costs
  • Flexible guidelines for recent short sales, foreclosures, bankruptcy
  • Purchase VA approved condos
  • Favorable guidelines for deferred student loans

If your PSC orders have you relocating to a Hawaii contact our VA experts to discuss your PSC and mortgage strategy.


Leave a comment

7 Essential Tips for VA Home Buyers in Hawaii

home buyers

Veterans and military members understand the power of preparation better than most.

That’s good news considering most home buyers still lack a solid grasp of what it takes today to land a home loan.

VA loans tend to feature more flexible and forgiving requirements than other loan types. But this no-down payment program is also a specialized option for home buyers.

Here’s a look at seven essential tips for veterans and service members considering a VA home loan.

1. No COE to start

You don’t need your Certificate of Eligibility to begin. You don’t even need to know if you’re eligible for a VA loan to start.

Lenders will typically obtain this critical document for you using an automated system.

2. Pre-approval is critical

This shows sellers and real estate agents you’re a serious buyer. Some agents won’t even accept an offer on a home without a copy of your pre-approval letter.

Pre-approval also gives you a clear sense of what you can afford and how much house you can buy. The last thing you want is to get under contract only to learn you can’t afford the payments on the home.

3. Find VA-knowledgeable agents

Real estate agents play a key role in the home buying process. But some know VA loans better than others.

VA-savvy agents can help borrowers avoid properties likely to pose a problem for the VA’s appraisal process. They can also lean on their understanding of VA closing costs to maximize your dollar.

4. Prepare for upfront costs

Most VA buyers take advantage of the $0 down benefit. That’s a huge opportunity that helps get veterans into homes now.

But homeownership can come with other upfront expenses, from making an earnest money deposit and paying for an appraisal to possibly covering a portion (or all) of your closing costs.

5. Understand closing costs

You can negotiate with the seller to pay some or all of your closing costs. There’s no limit to how much they can contribute to cover loan-related costs.

In addition, sellers can pay up to 4% of the purchase price to pay for things like prepaid property taxes, insurance and HOA Fees.

6. Buying condos

Veterans can only purchase condos in VA-approved developments. Lenders can help try to get an unapproved one on the list, but the process can take some time. In Hawaii there are several VA Approved Condo Buildings.

Adjust your home-buying timeline accordingly.

7. Not a one-time benefit

Veterans can use the VA loan program over and over again. It’s even possible to have more than one at the same time.

Veterans who’ve lost a VA loan to foreclosure may be able to buy again, too.

Its great to plan ahead and know you have a chance at Home Ownership when you PCS to Hawaii.

For more information please feel free to contact us today.

Our Team with having over 45 years of experience helping Military Buyers and sellers in Hawaii, We would like to Thank you for your service.

Mahalo

Ryan Riggins (RA)

John Riggins Real Estate

808-330-9105


Leave a comment

VA Buying Process

In most cases, you need to follow these steps to get a VA home loan.

Eligibility Requirements for VA Home Loans

Find a real estate professional to work with. Perhaps a friend has someone to recommend. Or you could look under “Real Estate” in your yellow pages or on the web.

Find a Lender

Locate a lending institution that participates in the VA program. You may want to get “pre-qualified” at this point – that is, find out how big a loan you can afford. Lenders set their own interest rates, discount points, and closing points, so you may want to shop around.

Get a Certificate of Eligibility

The Certificate of Eligibility (COE) verifies to the lender that you meet the eligibility requirements for a VA loan. Learn more about the evidence you submit and how to apply for a COE on our Eligibility page.

Find a Home and Sign a Purchase Agreement

Work with a real estate professional and negotiate a purchase agreement. Make sure the purchase and sales agreement contains a “VA Option Clause.”

Here’s a sample of a “VA Option Clause”:

“It is expressly agreed that, notwithstanding any other provisions of this contract, the purchaser shall not incur any penalty by forfeiture of earnest money or otherwise be obligated to complete the purchase of the property described herein, if the contract purchase price or cost exceeds the reasonable value of the property established by the Department of Veterans Affairs. The purchaser shall, however, have the privilege and option of proceeding with the consummation of this contract without regard to the amount of the reasonable value established by the Department of Veterans Affairs.”

You may also want the purchase agreement to allow you to “escape” from the contract without penalty if you can’t get a VA loan.

Apply for your VA Loan

Work with the lender to complete a loan application and gather the needed documents, such as pay stubs and bank statements.

Loan Processing

The lender orders a VA appraisal and begins to “process” all the credit and income information.

(Note: VA’s appraisal is not a home inspection or a guaranty of value. It’s just an estimate of the market value on the date of the inspection. Although the appraiser does look for obviously needed repairs, VA doesn’t guarantee the condition of the house. The appraiser, who is licensed, is not a VA employee. The lender can’t request a specific appraiser; assignments are made on a rotating basis.)

The lending institution reviews the appraisal and all the documentation of credit, income, and assets. The lender then decides whether the loan should be granted.

Closing

The lender chooses a title company, an attorney, or one of their own representatives to conduct the closing. This person will coordinate the date/time and the property is transferred. If you have any questions during the process that the lender can’t answer to your satisfaction, please contact VA at yourRegional Loan Center.