Loan officer spotlight: VA Lending
VA loans are one of the best ways we honor our Veterans. Conforming VA Loans are 100% loans which is contrary to today’s regulatory thinking, but continue to be the lowest defaulted loans in U.S. history. Why such low default rates? Several reasons from the lending side, but in this blogger's humble opinion, the most important is the character of our men and women in uniform.
From the lending side of the equation, VA Loans are better qualified than most any other loan. The reason is because we review things like child care and residual income (what is left over after the bills are all paid), that simply are not even considered in most other loans.
Occasionally, we run into market bias against the VA loan. This is mainly due to the way VA loans used to be handled For many years, lender fees were not consistent and the VA has strict rules on which fees are and are not allowed to be paid by a veteran. Those that are “not allowable” could not be paid by the borrower and other parties to the contract would end up having to pay them. Most lender fees are pretty homogeneous these days and we rarely run into this problem now.
The other stigma to VA loans was how appraisals are handled. The VA appraisal was ordered through the VA and they randomly chose one of their approved appraisers to complete the order. Sound familiar? Yep, this is the model Fannie Mae and Freddie Mac copied and we now follow a similar model for all other lending.
I would encourage a seller to consider a VA borrower as a better qualified candidate to buy their home. The qualification requirements are more thorough and the process to closing the same as other less qualified mortgage products. At the end of the day, we all owe our ability to transact real estate to the sacrifices of today’s VA borrower’s and their many brethren who came before.