Even before the near collapse of the mortgage and financial industries, the VA home loan program was about the most efficient and downright perfect mortgage program around. It offered many benefits to veterans, active duty military personnel and their families. It is still one of the best loan programs out there.
It’s true that the Veteran’s Administration home loan program still allows eligible veterans to buy a house with no money down. This 100% financing is a great advantage to veterans, and banks are continuing the trend of 100% VA loan financing. However, there are drawbacks to the program. Here are some changes that an expert VA loan officer thinks could be made to the program.
Changes that could be made to the VA home loan program
FICO score requirements could be lowered. Sometimes, for a service member on active duty or one who has been injured in combat, the FICO scores are not as high as the VA program allows. Each veteran or active duty service member’s case should be looked at on an individual basis. The FICO score may not tell the entire story.
Some closing costs could be allowed to be charged to the veteran. Theoretically, having a list of non-allowable closing costs is a good idea to protect the veteran from being charged unnecessary fees. In reality, banks and mortgage lenders have increased allowable closing costs for veterans to compensate for VA non-allowable ones. Some fees are necessary and legitimate, but lenders and sellers do not want to pay them, and the veteran is pushed into another loan that is not as beneficial for him as the VA home loan. By asking the veteran to pay these legitimate closing costs, they are not being put at a disadvantage and can choose the loan that has the most benefits.
The VA appraisal process could be quicker and easier. The appraisal process for VA purchased or refinanced loans is much too time consuming. Beyond that, VA appraisals often show a lower value for the same home than a non-VA appraisal. Although a conservative appraisal can help protect the veteran against mortgage fraud, the VA makes it difficult for the appraiser and loan originator to converse. It can affect the veteran’s ability to purchase or refinance a home.
Non-spouses could be allowed to co-sign. In some cases where a veteran does not make enough money to qualify, a parent may want to assist the veteran by co-signing on the loan. In the current VA loan rules, this would not be possible, as only a spouse can co-sign on a loan. This is a rule that would be simple to change and be of great benefit to some veterans.