While the sub-prime mortgage industry has all but evaporated and many people fight to get a conventional loan, the number of VA home loans has increased by 50 percent in 2012. The number of loans approved is the highest number of loans since the year 1994.
Many Veterans Refinancing
One main driving force of the loans is the historically low interest rates. Over 300,000 VA mortgages have been refinanced in order to take advantage of better rates. A vast number of the refinances have come in the form of the VA IRRRL. This is a streamlined version of a refinance loan that makes it easy to qualify and complete a loan, provided the borrower is not getting cash out of the deal.
Purchases are Up Too
The number of eligible people getting approved for a VA purchase loan has increased by nearly 10% since 2011. Many qualifying applicants are drawn to the zero down payment offered by the VA mortgage.
Besides waiving the need for a down payment, the VA home loan does not require mortgage insurance. With low rates and no PMI, veterans and active duty personnel are finding it easy to qualify for a home loan.
Secrets to VA Program Success
In the wake of the real estate crash, much publicity has been given to the VA mortgage program due to its low delinquency rate. While the FHA and conventional mortgage loans have delinquency rates at 15% to 20%, the VA program has shown the lowest delinquency rates of the three, and for good reason.
First and foremost, the VA loan guidelines have strict debt to income ratio guidelines. There are guidelines in place for the mortgage payment compared to the monthly income as well as all debt. In addition, the VA has strict residual guidelines in place. In essence, the rules are forcing lenders and applicants to ensure the veteran can reasonably afford the mortgage, all other debt and still have money left over for other things like family, entertainment and savings.
These guidelines have been so successful that Fannie Mae, Freddie Mac and the FHA have all looked in to these guidelines to determine how they can be applied to other loans. Using successful practices from the VA could strengthen the financial industry and hopefully be a step in the right direction from preventing another financial meltdown in the future.
For additional VA loan information, please visit our VA Mortgage page!
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