When you are looking for a loan and the 2017 VA Versus FHA Loans debate comes up there are some common misconceptions that can be had. There are a lot of borrowers that mistakenly go with an FHA Loan over a VA Loan for the fact that a lot of lenders these days have lender overlays that make VA Loans harder to obtain than FHA Loans. If you are interested in a VA Loan, then coming to Loan Consultants is the right thing to do because we deal with lenders with no lender overlays on VA Loans. For example, a lot of lenders want a 620 or even a 640 FICO score in order to facilitate a VA Loan, but we work with lenders that have a minimum FICO score of 580. When the lender is looking for a 620+ FICO score, this is a lender overlay and you will see this a lot across the industry from banks and lending institutions as they try to minimize the risk they take on. You need to find a lender that wants to make loans happen and not prevent borrowers from obtaining homes, especially Veterans of the United States Military. It isn’t fair to them that they are forced to take on loans that will require down payments, mortgage insurance, and sometimes higher rates than the VA loans they deserve.
Let’s take a look at the guideline comparison for 2017 VA Versus FHA Loans. First we are going to look at VA Loans and you can see their guidelines are below:
– VA Loans are for Veterans of the United States Military and are required to have an honorable discharge as well as a COE or Certificate of Eligibility to obtain a VA Loan
– The is not a minimum credit score requirement for VA Loans, however every lender will establish a a minimum FICO score with the most attractive requirement being a 580 FICO score.
– Debt to Income or DTI Ratios do not apply to VA Loans and recently I have seen a VA Loan get approved with a 60% debt to income ratio. There is however a VA Residual Income Requirement which requires a minimum amount of funds left over after housing payments are made.
– Outstanding collections and charge off accounts do not have to be paid off for a VA Loan.
– There is a 2 year waiting period after Chapter 7 Bankruptcy discharge date.
– There is a 2 year waiting period after the recorded date of the foreclosure or deed in lieu of foreclosure.
– There is a 2 year waiting period after a short sale recorded date.
– Deferred student loan payments of more than 12 months are not included in debt to income ratios.
– Ability to pay no money out of pocket with 100% financing and obtaining a 4% Seller’s Concession to cover funding fees and closing costs.
In addition to the VA guidelines as seen above, it is also good to know the FHA Loan requirements to accurately portray the 2017 VA Versus FHA Loans.
– For a 3.5% down payment loan, there is a required FICO score of 580.
– If the FICO score is between 500-579, there is a 10% down payment requirement.
– If your FICO is between 580-619 your debt to income ratio is 43%.
– If you have a 620+ FICO score you can have a 56.9% debt to income ratio with your front-end ratio being 46.9%.
– Outstanding collections and charge off do not have to be paid off.
– 2 year waiting period after a Chapter 7 Bankruptcy discharge date.
– 3 year waiting period after recorded date of foreclosure, deed in lieu of foreclosure, and short sale.
– Deferred student loans are included in your debt to income ratio as either 1% of the outstanding balance or the fully-amortized repayment amount.
You can see the 2017 VA Versus FHA Loans and it is clear to see if you can qualify for a VA Loan that this is the best course for you to go. If all else fails and you need to go with an FHA Loan, still know that guidelines and rates are very favorable for you. To evaluate which loan program is best for you, please reach out to us ASAP at 888-900-1020 or firstname.lastname@example.org. We are available every day, night, weekend, and holiday!