The number of new VA loans declined last year to just over $110 billion, the first year-over-year decline since 2010. VA loans typically have lower interest rates than conventional mortgages, allow for higher debt-to-income ratios and lower credit scores, and they don’t require private mortgage insurance. If you can qualify, the VA loan is the best program out there. The VA loan is one of the reasons 79% of veterans own their own homes, compared with just 63% for the non-veteran population. Lenders often pitch veterans products other than VA loans that are better for the bank, not the borrower. It takes lenders more work and time to process VA loans than conventional loans, which cuts into profits, so many loan officers will either not offer the program or persuade borrowers not to consider a VA loan.
About 90% of VA loans have no down payment. And unlike most programs, there is no maximum debt ratio, meaning that the monthly mortgage payment can be higher than the typical lenders requirement of no more than 31% of gross monthly income, or exceeding the 43% of total debt-to-income ratio. The minimum credit score requirement for a VA loan is also low, 600, while most home mortgage loans require a credit score of at least 620. A VA loan can also be used to refinance an existing loan. Veterans can borrow without any down payment for a home so long as it is for their principal residence and they can refinance borrowing up to 100% of the value of their primary residence on a cash out transaction. About 90% of VA loans have no down payment. The entitlement also allows military members and vets to qualify for larger loan amounts depending on the county. In those cases, a down payment is sometimes needed, but with a VA loan the vets won’t need as much down as they would if they chose conventional financing. Contrary to what most people believe, entitlement can also be reused on subsequent home purchases, so long as the previous loan is paid off first.
But the VA’s hurry-up-and-wait requirements when it comes to appraisals and inspections, associated red tape and other idiosyncrasies when compared with other non-government loan programs can hurt military buyers in some markets, deterring borrowers from VA loans, and ultimately hurting Veterans’ efforts to land homes. Please don’t be deterred, I have provided Veterans’ with VA home loans for many years and have a VERY high, 100% close ratio, despite the potential drawbacks. So, if you are working with a Veteran home buyer, or if you receive an offer from a Veteran home buyer, please give it the same consideration that you would any offer. If you are a Veteran home buyer, thank you for your service and please take advantage of the wonderful loan program that you have earned access to!