Q: All things being equal — putting 20 percent down and being preapproved — is a Department of Veterans Affairs loan more advantageous than a Federal Housing Administration loan? Is there any downside to a VA loan?
A: Great question. First, to get a VA loan, you must have had some military experience. There is no such requirement for an FHA loan.
Assuming you are VA-eligible, since you are putting 20 percent down, you will be missing one of the major benefits of a VA loan, that is, you could get a 100 percent home loan, without the need for a down payment.
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With an FHA loan, a borrower must put down at least 3.5 percent of the purchase price. However, VA does require borrowers to pay a “funding fee,” which can range between 0.5 and 3.3 percent, depending on your military history. Disabled veterans and surviving spouses will not have to pay that fee.
Let’s look at other comparisons:
Interest rate: Traditionally, interest rates with an FHA loan are somewhat higher than conventional loans.
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Mortgage insurance: If you get an FHA loan and do not put down at least 20 percent, you will have to pay insurance to protect the lender should you go in default. In my experience, when you go to closing (escrow) on an FHA-insured loan, you have to pay an upfront premium, which will add to what you have to pay when you get the loan. There is no requirement for such insurance with a VA loan.
Processing: It will likely take your lender a lot longer to process a VA loan than an FHA loan. The Department of Veterans Affairs has to approve every loan.
Bottom line: Be a smart consumer. Shop around. Ask one or two lenders to provide you with a good faith estimate of what a VA and an FHA loan will cost.
Q: My beautiful historic building is deteriorating very rapidly. None of our condo boards or management companies have done anything to stop this devastation, except to impose a special assessment that owners are still paying, but nothing has been done.
Whenever I ask why nothing is done, the manager always says there is no money. The board president is ignoring these questions.
This condo is mostly occupied by renters; there are only a few owners left and even they show no interest in fighting for the building. Is there a way to find a solution? Is a call for a building inspector advisable?
A: Unfortunately, you are not alone. As a result of the mortgage meltdown a few years ago, many condo units were foreclosed upon. Now, many associations are scrambling just to stay alive, let alone provide important maintenance and improvements every association needs.
You have the right to review the books and records, including the financial status of your condo. I would demand that the board president or the property manager provide you with last year’s audit report as well as this year’s budget, income and expenses.
You should determine if there are any delinquencies, and if there are, what is the board or manager doing about it? Is there a strong collection policy in effect?
I know many readers will say that my suggestion won’t work because management won’t be cooperative. If that’s the case, you will have to find a good real estate attorney to ask a judge to require the documents be produced.
However, if you will not have any support — moral or financial — from the few owners who are still there, then I hate to say it, but perhaps you should consider selling. Take your loss before it gets worse.
Benny Kass is a practicing attorney in Washington, D.C., and in Maryland. He does not provide specific legal or financial advice to any reader. Readers may email him, but he cannot guarantee a personal response.
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