Military veterans usually go through a lot less during the home buying process. The VA loan program is boasted as easy and stress-free. Low credit scores accepted and no down payment are the biggest benefits of the program, and this is in large part due to the Department of Veterans Affairs securing the loan.
However, over a year ago, lenders started crunching down with most of the nation’s major lenders following suit. Before, low credit scores were workable. Now, a credit score at 610 will leave an interested Veteran buyer with no options.
Although, no down payment will still be the greatest feature of the program, a low credit score will need to be worked back up to the standard requirement. Major lenders will not offer loans to people with a score below 610.
The stricter credit requirements also affect refinancing opportunities, which allowed borrowers to use VA funds to refinance, with minimal paperwork and no appraisal. Lenders are now requiring borrowers to pay for an appraisal, which can cost over $100 or substantially more depending on the location of the home. If the refinanced loan amount is more than the home’s value, lenders will reject the application.
Although many market experts can understand the new restrictions because the government only insures a fraction of the loan amount, they also brought out that veteran consumers are less likely to default and usually have better credit scores, ranging from 700 to 750. Veterans are disciplined when it comes to their payments and responsibilities. So, the crack down seems a little uncalled for.
However, the VA loan program will continue to remain a competitive product in the market. Borrowers who qualify can still obtain great interest rates and lower closing costs.
To qualify, a service man or woman must prove 24 months of continuous active military duty. He or she must have been either honorably discharged, or served at least 90 days on active duty during war or 181 days on active duty during a time of peace. Members of the Military Reserves and National Guard are required to have served a minimum of six years. One may also be determined eligible if one is a spouse of veteran who is missing in action, a prisoner of war or died from service related events.
In most cases, there will still be a small funding fee. For ones with low credit scores, speaking to a VA counselor can help with getting scores back on track.
Photo thanks to Andresrueda under creative common license on Flickr.