You may or may not know this, but the Department of Veterans Affairs is not lending you the money on a VA home Loan.
That’s right, I bring this up because a lot of the Veterans that I have spoken to in the past 25 years or so believe that the VA is providing the loan.
Why would I mention this?
Well, if you know how things work, then you can make better decisions on what is right for you, correct?
So, the VA will guaranty your loan and will provide the guaranty to one of many approved VA lenders.
To put it in simple terms, a VA guaranteed loan protects the lender against loss when there is a foreclosure.
What that means is that each lender can get the guaranty, but they can also determine what the guidelines and requirements are for lending.
What does this mean to you?
The VA provides a set of loan guidelines for each lender to follow (minimum requirements) in order to get the guaranty.
So what makes one VA loan different from the next?
Quite a few things, actually…
Since each lender can take the base VA guidelines, then add to them, what we find is that lenders offering VA loans do have their own guidelines.
That’s right, they can add to these guidelines to make them more difficult.
They cannot make the VA’s basic guidelines (minimum requirements) less restrictive, or easier, because, you guessed it, they will not get the VA guaranty they need.
Here are some common ways that lenders add their own requirements to VA Loans.
Credit Scores – some lenders have minimum credit score requirements on VA loans of 620 and higher and others allow credit scores down to 500.
Think about that. You could walk into your credit union or other lender and be turned down for a VA home loan because your credit score is lower than their requirement, not the VA’s.
And the reality is that you may qualify for that same loan with a different lender that allows a lower score.
Debt-to-Income ratios – the VA has their guidelines on this, but they give each lender room to determine their idea of what the maximum amounts will be of total monthly payments (housing payment plus other debts) in relation to gross monthly income.
Underwriting (decision to approve or decline loans) – lenders are allowed to manually underwrite loans when the computer scoring model will not approve a VA loan.
Some lenders don’t offer manual underwriting at all. Others that do will have different credit score minimums.
Interest Rates – VA home loans are offered at different rates. Each VA lender can set their own “pricing” for these loans.
I know this all sounds like a lot. But, there are hundreds of different VA home loan options out there for you.
How do you make sure that you are getting the best VA home loan?
You can go to one of the big “Lending Tree” type websites, who will sell your information as a lead to brokers and you will get a ton of calls from different companies.
Or, you can contact one single company, speak with one experienced loan officer who has access to hundreds of VA loan programs and can provide you with VA loan options.
There are companies, like ours who work with many of the nation’s largest wholesale VA lenders and have access to these VA loan programs.
Once we know your specific situation and what you are looking for, we can match you with the right one.
So, what are you waiting for?
Are you ready to see what type of VA loan we can offer you?
Posted by: Brian Bush
Brian and his team have been funding VA Home Loans for over 27 years.
Since 1991, they have funded over 3,000 loans.