Thursday, July 18, 2019

Combo OHCS VA Loan Offers An Expanded Home Loan Choice for Oregon Veterans.

The OHCS/VA combo loan that I recently posted about HERE provides an alternative to the Oregon Department of Veterans Affairs home loan program. [The post notes that a veteran does NOT have to be a first time home buyer to use the OHCS bond loan program, so long they have not previously used a bond loan program or Mortgage Credit certificate program in Oregon or elsewhere].

The downside to the ODVA loan program is the 5% minimum down payment, which then triggers the need for private mortgage insurance. Also, condos, townhouses, and manufactured homes all require a minimum 20% down payment for the ODVA loan program.  [ODVA's loan origination guide is HERE].

ODVA's lowest note rate of 3.125% IS below the lowest 3.25% OHCS note rate but that rate is only available to veterans whose loan reservation occurs within 25 years of discharge. The ODVA lowest rate for all veterans is 3.875%, higher than the OCHS/VA combo rate. 

The VA loan program also waives the federal funding fee for veterans with more than 10% disability; the ODVA program has no similar cost savings for disabled veterans.

The first table here shows my comparison of ODVA and OHCS/VA combo loan features. 

The second table below shows that for a $425.000 purchase price the OHCS/VA combo loan would actually have a $18 lower monthly loan payment (before taxes and insurance) by avoiding the $178 monthly mortgage insurance expense the ODVA loan program requires. This is despite a higher total loan amount ($434,138 vs $403,750) and even when the lowest ODVA loan rate (not available to all veterans) is used.  

While the lower monthly expense using the combo OHCS/VA loan provides a benefit, the bigger benefit is that a veteran using a combo OHCS /VA loan would not have to make a $21,250 minimum down payment required by ODVA program.

To summarize:

The OHCS/VA Combo loan may be the better choice IF
  • The veteran does not have the funds available for 5% minimum down payment OR
  • Discharge is greater than 25 years from fund reservation OR
  • Veteran has service-connected disability of 10% or more OR
  • Veteran is purchasing a condo, townhome, or manufactured home OR
  • Veteran wants to avoid monthly mortgage insurance cost.

The ODVA loan may be a better choice IF
  • The veteran has at least 5% of the purchase price available for a down payment AND
  • Discharge is within 25 years of fund reservation OR
  • Income or purchase price is above 0HCS limits.

Originally created and posted on the Oregon Housing Blog

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