USAA vs. NFCU: VA Loan, post-housing bubble Edition

[CAVU]

An interesting read.

Realty agents may split when they’re offered a sub-par commission

http://www.washingtonpost.com/reale...f9e5e2-fd80-11e4-8b6c-0dcce21e223d_story.html

 

[azguy]

An interesting read.

In other news, if you go out to dinner and tell your waiter up front that you only tip 3% of the ticket, or a flat $4 "service fee," your meal is probably going to suck.

 

[CAVU]

In other news, if you go out to dinner and tell your waiter up front that you only tip 3% of the ticket, or a flat $4 "service fee," your meal is probably going to suck.

Shack!

 

[zippy]

Now that it's a given I'll be in Jax for at least four years, I'm looking at buying my first house. I've plumbed the threads on here for info on the VA loan from either NFCU or USAA, and am now more confused than when I started. Since a lot of them were either locked or written in an entirely different housing climate, I thought I'd make a new one to see what people's experiences have been with getting a mortgage, especially those in the past seven years


But on top of that, USAA offers something called MoversAdvantage, which includes among other things a reward for buying (or selling) a home. I'm looking at the 200-250k range, so this reward would be $950. If anyone here has used the MoversAdvantage program, I'd be very interested to here your experiences with that.

I found a lot of mixed reviews on mortgages from NFCU and from USAA. The online reviews for the MoversAdvantage are very high, but I have to imagine that having physical locations makes this process a lot easier, and NFCU has a branch right outside the gate. So anyone with some sea stories on getting a mortgage from either company, especially recently, would be greatly appreciated.

The home looking process is fun... The home buying process is not, especially when

I used the USAA Mover's Advantage/ NFCU Realty Plus programs when I PCS'd from Florida. The kickback is nice, but I found my assigned realtor to be just adequate to get the job done and not get fired from the program. I've since found other realtors who don't participate in the referral program in order to process clients through for 30-50% of a normal commission split (After the program lops 40% off the top and their broker take their cut). These realtor's have tended to be more knowledgable and not as worried about how far off the asking price you're putting your offer in at. An additional catch to some of these programs is you have to use their mortgage services in order to get the kickback... it's an arrangement that keeps business flowing and the quality of the service to their customers low.

When it came to financing through USAA and NFCU- I explored both did so in order to get the cheaper rate and the program kickback- but it was a terrible experience. I've since purchased several investment properties using preferred lenders of the Realtors I bought through and those experiences, while still unpleasant weren't nearly as long or rage inducing.

In Jax I use Pete Pacifico from Pacifico Properties. Pete is an old S-3 turned P-3 turned C-40 reservist and knows the area well. His brokerage is full service meaning he'll act as your buyers broker for purchase, property manager if you decide to rent it out, and listing broker when you ultimately decide to sell it. Pete has been involved in 4 of my property transactions and I know several other people who've had exceptional experiences with him.

If he has the money to put 20% down, what is the advantage to a VA?

Lower interest rates in many cases.

An interesting read.

Realty agents may split when they’re offered a sub-par commission

http://www.washingtonpost.com/reale...f9e5e2-fd80-11e4-8b6c-0dcce21e223d_story.html

In some states, buyer representation without a written contract is illegal. While that initially doesn't make sense, this article hits on the issue.

A written contract between a buyer and a buyers agent outlines the fiduciary relationship between the Broker/agent and their buyer as a client as well as stipulates the fee that the Buyer ensures their agent will be paid in return for their services. Often times the Commission split from a listing covers those fees ( a common 6% split goes 3% to each of the buyer and seller brokers/agents, where a 5% spilt goes 3% to the buyers broker and 2% to the sellers broker/agent.) In cases where the Listed commission doesn't cover the agreed upon buyers broker/agent fees, the buyer is expected to make up the difference.

If you're worried that your buyers broker/agent may steer you away from properties with unfavorable commission splits, agree to ensure they'll get paid X% in writing prior to looking with the understanding that their is a possibility that you may have to come out of pocket if you happen to choose to buy a property with a buyers broker/agent commission lower than that amount. Don't worry, your agent will let you know if you do.

 

[zippy]

If he has the money to put 20% down, what is the advantage to a VA?

VA loan typically has lower rates, and is assurance under certain conditions. Many conventional mortgages are not assignable anymore.

Also, as long as he can afford the monthly payment (and rents will cover mortgage if he rents it out) he'll leverage less cash to get a tangible asset.

He can use his 20% down and make it a 25-30% down on a cheaper investment property here and acquire an income stream off the same investment- or he can just keep it invested, or buy toys etc.

 

[Tycho_Brohe]

Wow, I posted this back in May? Man, I'm lazy.

Finally started hitting the pavement and looked at some houses. Navy Federal has pre-approved me for 250k, and they did it without a credit pull because I have a few accounts with them already. They just needed my income and debt info, making it essentially a pre-qualification letter, save for the fact that they used the term "pre-approved" on it.

I did wind up going with Peter Pacifico, and so far so good. I'll echo the recommendation for anyone looking to buy/sell/rent/whatever in the area.

Checked out four houses, then spoke to someone at KB Homes about a new construction. The first houses all hovered around 190k, and the new construction would be closer to the top of my budget, option dependent. Considering that new construction has almost no wiggle room in the price (although they can throw in some options or upgrades presumably), and the houses have been on the market for at least a month, the price gulf is pretty wide. But it'd be a new home that I get to pick all the options on. Plus KB will throw me 7,500 towards closing costs, even if I decide to go with Navy Fed. I guess I have a lot of things to ponder.

Oh, and I did all that in a rental Dart because supposedly my truck's battery inexplicably died. RIP August 2011-October 2015. But I digress.

 

[exNavyOffRec]

Wow, I posted this back in May? Man, I'm lazy.

Finally started hitting the pavement and looked at some houses. Navy Federal has pre-approved me for 250k, and they did it without a credit pull because I have a few accounts with them already. They just needed my income and debt info, making it essentially a pre-qualification letter, save for the fact that they used the term "pre-approved" on it.

I did wind up going with Peter Pacifico, and so far so good. I'll echo the recommendation for anyone looking to buy/sell/rent/whatever in the area.

Checked out four houses, then spoke to someone at KB Homes about a new construction. The first houses all hovered around 190k, and the new construction would be closer to the top of my budget, option dependent. Considering that new construction has almost no wiggle room in the price (although they can throw in some options or upgrades presumably), and the houses have been on the market for at least a month, the price gulf is pretty wide. But it'd be a new home that I get to pick all the options on. Plus KB will throw me 7,500 towards closing costs, even if I decide to go with Navy Fed. I guess I have a lot of things to ponder.

Oh, and I did all that in a rental Dart because supposedly my truck's battery inexplicably died. RIP August 2011-October 2015. But I digress.

A few people may echo this as well, but look at what you spend for normal expenses that the bank doesn't consider when looking at how much they will loan up to (eating out, movies, etc), my first house I didn't really consider some of these and things were tight for a bit.

 

[Spekkio]

So I'm trying to do the rent vs. buy calculation to find my threshold for which one is more financially advantageous. I'm wondering what costs if any I am missing. So far I have with a 10% down payment:

-Commission (on re-sell): 6%
-Closing costs (on buying): 3%
-Taxes: 1.5% per year
-Repairs: $10,000
-VA Processing: 1.25% OR PMI @ 1% per year
-Depreciation risk: 6% (based on the house selling for its purchased value, minus inflation).
-Mortgage interest: 3.75%.

This puts the break-even point for a 3 year set of orders at around $340,000. Yes/no?

 

[Spekkio]

Whoops, I meant $240,000, not $340,000.

 

[smoke_screen]

I've said it before but in my opinion, and experience, it is nearly impossible to make it pencil out, or make sense from a risk/return or cost/benefit, to buy and sell in one set of orders. To buy and hold as an investment, yes it can pencil. Frankly the only ways I think it's a good decision to buy with the intent to sell in ~3 years are if you have major value-add repairs planned or you can't rent in one specific, critical location (i.e. splitting distance to working spouse job location, etc). I've also said it before but I would never do business with USAA for a meaningful transaction like buying a home. Their app is good, they call you by your rank after all the phone prompts, and they refund ATM fees, but are a joke on even junior varsity level banking like mortgage and will totally gouge you -- it's almost an embarrassment that people trust them in my opinion.

 

[KilroyUSN]

Whoops, I meant $240,000, not $340,000.

Are you also taking into account how much rent would end up costing you, in three years? Breaking even at $240,000 is still better than never seeing a dime come back after renting.

 

[Spekkio]

I've said it before but in my opinion, and experience, it is nearly impossible to make it pencil out, or make sense from a risk/return or cost/benefit, to buy and sell in one set of orders. To buy and hold as an investment, yes it can pencil. Frankly the only ways I think it's a good decision to buy with the intent to sell in ~3 years are if you have major value-add repairs planned or you can't rent in one specific, critical location (i.e. splitting distance to working spouse job location, etc). I've also said it before but I would never do business with USAA for a meaningful transaction like buying a home. Their app is good, they call you by your rank after all the phone prompts, and they refund ATM fees, but are a joke on even junior varsity level banking like mortgage and will totally gouge you -- it's almost an embarrassment that people trust them in my opinion.

Thanks for the input.

Yes, I've gathered that unless I find a very under-valued home with a person desperate to sell or the housing market does well, then buying and selling in 3 years is not a good plan. As such, I'm trying to find a place such that my mortgage payment will be under the E-5/E-6 BAH and near a good school district. That will allow me to rent it to a good pool of people coming here on orders, from nub JOs who want to split a home on the cheap to senior enlisted with families. It will also allow me to build a great deal of equity while living there.

I've also found that NFCU and USAA aren't very competitive, particularly if you have money to put down and/or will attain 20% of the home's value in a couple of years. NFCU isn't a bad deal per se, but in their effort to give you a 'bottom line price' along with no PMI and origination fees, they end up rolling that into the interest rate for the entire mortgage. It ends up being more expensive over the life of the loan in most cases, and particularly if you want to try to pay down the mortgage early.

Are you also taking into account how much rent would end up costing you, in three years? Breaking even at $240,000 is still better than never seeing a dime come back after renting.

Just so the peanut gallery knows, I estimate that the unrecoverable cost of buying/selling a home in 3 years (closing costs, PMI, interest, taxes, a budget for random broken shit that you have to fix, commission upon resell) to be in the realm of $80,000 on a $265,000 mortgage, which is on the cheap end in this area. Rent paid would be $72k. The max I could go and break even in 5 years is about $320,000.

Over 5 years the unrecoverable costs are in the realm of $115k, while the rent paid would be $120k, thus making it a decent deal, so long as the home appreciates with inflation.

Now whether this becomes a financial disaster or a great play is greatly dependent upon the housing market. If the house sells for what I bought it for, thus losing 2% of value each year due to inflation, I end up losing $20k by buying and re-selling in 3 years, which is quite a big hit. To break even in a 3 year re-sell, the home would have to gain 2-3% value each year.

Thus the plan is to hold and rent. While that won't make me rich, and may carry some headaches, it'll be a better play than just flushing 72 thousand bones down the toilet. And with some aggressive payments while scheduled here I can take a big bite off of the interest owed over the total of the loan.

 

[KilroyUSN]

My comment was by no means a criticism on your math, rather making sure you were putting that into your equation.... seeing how you said " I'm wondering what costs if any I am missing".
Thanks for making sure I knew that I was either "a group of people who criticize someone, often by focusing on insignificant details.", a group of children according to Howdy Doody, or "the top gallery in a theater, where the cheaper seats are located." your pick. Next time I won't attempt to help.

https://en.wiktionary.org/wiki/peanut_gallery

In any case your explained math looks pretty strong to me (A guy who owns a duplex as well as the house I am currently living in.)

 

[Spekkio]

"Peanut gallery" wasn't meant as derogatory and I thought that it just meant 'the crowd.'

Another quick reference: I'm finding that accepting extra interest in order to buy back closing costs or origination fees is never a good deal no matter what your payoff horizon is. Does this check?

 

[KilroyUSN]

Sorry, mom referred to us, kids, as the peanut gallery probably on a daily basis.... plus I used to watch Howdy Doody.... so I probably observe it more literally than than the average individual.
I don't have any experience with buying back closing costs... typically I try to minimize my interest, on the off chance that I am stuck with the property longer than I would have liked.... Bought my duplex in 2007, right before the market crashed... still thankful I bought it as a rental investment... saw too many of my buddies get crushed in order to go to shore duty or went back to back sea tours to stick around.