Is a Zero Down VA Loan Right for Me?

Posted February 18th, 2011 by admin
While a 0% Down Payment Loan might sound like a wonderful idea at first glance, a lot of San Diego home buyers might want to think twice before deciding not to add to the pot before going into a home purchase.
San Diego Real Estate has and always will be expensive.  With the best weather in the United states, beautiful beaches, a cosmopolitan downtown,  rugged natural attractions, SeaWorld and the world famous San Diego Zoo, it’s not surprising that there would be a significant premium for property located in “America’s Finest City”.
That being said, a veteran who uses their VA Loan benefit to purchase a home in San Diego for the median price of $200,250 with zero down, the veteran would only be able to purchase a single bedroom home.  If the Veteran saved some money, they would be able to afford (with the same mortgage terms) a two or three bedroom property at $257,000.
The difference between the two houses is not merely square footage and the obvious number of bedrooms:

1. Crime and Neighborhood Statistics:
One bedroom homes tend to be located in lower income demographic areas in San Diego.  High correlations between lower income neighborhoods and crime is an important factor in establishing where you want to live.

2. Cost of Outgrowing:
Although agents and realtors may want you to think that the process of buying and selling a home is inexpensive and easy, the contrary is true- especially in today’s ill tempered housing market.  The average real estate commission is 3% per side of transaction.  What that means is that when you are ready to sell your home, you will have to pay a total of 6% as the seller to cover agent commissions not including any seller incurred concessions which could add up significantly when determining the final “takehome” from your home sale.  By purchasing a 2 or 3 bedroom, you will save yourself time and money in the long-run by allowing you room to grow.

3. Roommates: Nothing beats living rent/mortgage free.   If you have an extra bedroom or two, you may be able to have a few roommates to help cover the mortgage and put a few extra dollars in your pocket.  Heck, the way rents prices are going, you may even be able to cover the entire mortgage!
4. Resale Value: Market analysis shows that 3 bedroom homes outpace 1 and 2 bedroom homes in appreciation.  The latest figures by Trulia show that 3 bedroom houses rose in value 4% vs its 1 and 2 bedroom counterparts, which both lost annual appreciation by 6% and 3% respectively. (See below)

No. Bedrooms Nov – Jan ’11 y-o-y 3 months prior 1 year prior 5 years prior
1 bedroom $181,250 -6.3% $175,000 $193,500 $343,500
2 bedrooms $257,000 -3.0% $259,646 $265,000 $430,000
3 bedrooms $360,000 +4.3% $355,000 $345,000 $520,000
4 bedrooms $429,875 0.0% $430,000 $430,000 $690,000
All properties $320,604 +5.1% $320,000 $305,000 $506,250

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