VA loans serve a great purpose – helping veterans purchase or refinance homes. Veterans deserve to own their own homes, and VA loans have helped make this possible since 1944.
One of their greatest benefits has always been the ease with which veterans can qualify, but watch out – this is changing. Due to the economy and heightened number of foreclosures, VA lenders now have tighter policies for their borrowing requirements. VA loans are still easier to qualify for than conventional loans, but they’re not as easy to qualify for as they once were.
VA loans are easier to qualify for, in part, because of their looser credit requirements. However, it used to be the case that veterans didn’t need to worry about credit underwriting or appraisals of their new homes. But now, lenders are looking more closely at borrowers’ credit backgrounds, and borrowers have to pay for their new home appraisals as well.
So what sort of shape do you have to be in to qualify now? First of all, your credit score should be above 610. More and more lenders are turning veterans away who have scores lower than this. Also, if your loan amount exceeds the amount of your Notice of Value, there’s a higher chance of not qualifying as well.
That being said, the most veterans are still in good standing to qualify for a VA loan. The average 2009 credit score for veterans was 700, which is lower than the overall national average, but still 90 points above what’s typically needed for veterans to qualify.
Now that lenders are having to tighten their standards though, it’s more important for veterans to be very aware of their financial situations: debt-to-income ratios, credit scores, outstanding loans, spending habits and the like. It’s only natural that the restrictions for VA loans are getting tighter in such tough economic times, but VA loans still remain comparatively easier to qualify for, and they offer a host of great benefits, including zero down payments. Rather than scaring you away, let these tightening restrictions help you become more conscientious of your finance habits.
Photo thanks to nikcname under creative common license on Flickr.