Be wary of VA Jumbo Home Loan
In reading JoAnn Moore's Business article ("Jumbo home loans available for veterans," Cape Gazette, May 9), I was surprised that the concept of jumbo home loans and veterans would go together.
Ms. Moore reports that, "The VA Jumbo Home Loan...can go up to $700,000...no down payment is required...no monthly mortgage insurance...no limit on seller's help toward closing costs." And, only a below average credit score of 680 is required (average is 693 and median is 711). A debt-to-income ratio "generally" is limited to 41 percent. But, the use of "generally" suggests that a co-signer might be used to get around the restriction.
Furthermore, "any veteran who receives military disability income pays no upfront funding fee," which would reduce the monthly payment on the $700,000 loan to "only" $3,341.
But when you look at veterans' median income of only $36,264 (U.S. Census for 2012) it seems perverse that the Veterans Administration would even consider them prospects for a jumbo home loan.
According to former Reagan Budget Director David Stockman, "Mortgage credit is not expanding... it (mortgage debt) still stands at a two to three times its historical ratio to wage and salary income. The only exception is a small pocket of jumbo loans to affluent homebuyers..." Must be those rich veterans.
Suddenly, it seems like 2006 all over again with the government and mortgage companies riding the FED's low interest rate manipulations in promoting jumbo debt with no down payment. And this in an era when, according to Barron's newspaper, total household debt (mortgage, credit cards, auto loans, etc.) was $11.5 trillion in the last quarter 2013.
Have we learned nothing from the real estate crash and its toxic assets?
As Ms. Moore benignly entices veterans to, "use your benefit to realize your financial goals," they should be wary of mortgage providers bearing gifts of government sponsored heavy debt.