A VA loan is an example of how our country cares for those who have cared for us. But navigating the VA loan market can be difficult because too many lenders use financial jargon. VA loan inspectors look for certain problems with a home, such as wood rot or lack of floors, that need to be addressed before the sale can continue. Some sellers refuse VA loans because of that inspection, assuming this will complicate the sale.
But those issues are largely myths that stem from the past. VA loans have changed a lot in recent years and are now generally no more difficult or expensive for sellers than any other loan. As a subscriber, you have 10 gift items to give each month. Anyone can read what you share.
Military veterans have long been used to a relatively easy mortgage process. Even borrowers with no down payment or with a low credit score were generally granted V, A loans, largely because the Department of Veterans Affairs secures a quarter of the loan amount. But about two years ago, lenders began limiting the conditions under which they would offer these mortgages, and industry executives say that since the beginning of the year, every major lender in the country has followed suit. Loans with no down payment, he said, but “if you have a 610 credit score, the best thing to do is work on your credit and try again in a couple of months, because you really don't have any options.
Stricter lending policies also extend to the Streamline Refinance program, which allows borrowers with V, A loans to refinance into another V, A loan. with very little paperwork and, until recently, no appraisal. White said he understood why lenders might be restricting lending, since insurance V, A. it only covers 25 percent of the loan amount.
But he added that borrowers of V, A loans. generally had a lower default rate than major borrowers overall 2.6 percent versus 3.4 percent, according to the Mortgage Bankers Association, even though their credit scores were typically lower. Mortgage borrowers tend to “show some discipline,” said Mr. White, offering an explanation, “and we think they put a lot of effort into making their payments.
The average credit score for a borrower V, A. last year was just over 700, while the average credit score for all borrowers was 750, according to the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, the government-sponsored companies that set underwriting standards. Loans remain competitive with other credit products. Qualifying borrowers must demonstrate 24 months of continuous active military service, and cannot have experienced a dishonorable discharge, among other things they can secure rates of 4.75 percent on 30-year fixed-rate loans, he said.
That's the case even for borrowers with 620 credit scores, he added. The nationwide average rate for all 30-year fixed-rate loans is around 4.70 percent. Many veterans are struggling especially hard to compete, and according to Wemert and several other realtors familiar with the VA loan program, that's because many sellers, and their agents, don't understand how it actually works. Many sellers and their real estate agents don't like VA loans because they believe that these mortgages make it harder to close or more expensive for the seller.
The stigma of VA lending is especially difficult to overcome now, in today's extremely competitive housing market. .