Most mortgage loans require a down payment, but veterans may be exempt. The VA Loan Guaranty program offers eligible servicemen and women the opportunity to purchase a home with no down payment and no mortgage insurance premium. How have VA loans fared in comparison to other kinds of mortgages?
At the end of the second quarter of 2010, the delinquency rate for VA loans was 7.79 percent, compared to 13.3 percent for FHA and 17 percent for subprime. Only prime loans dipped below VA at 7.1 percent. In the foreclosure category, VA loans at 2.50 percent fared better than the rest (subprime 14.4 percent, FHA 3.62 percent, and prime 3.49 percent).
Mortgage News Daily attributes the success of VA loans to several components including a neutral appraisal process and foreclosure avoidance help for homeowners at risk of default. But the key factor lies in the eligibility process. Applicants must demonstrate a debt-to-income ratio of less than 41 percent and adequate residual cash (after major expenses) at the end of the month. Residual income reflects the ability to shore up finances for the rainy days ahead.
Thomas J. Pamperin, a VA deputy under secretary, described the VA loan as “a model of stability.” If you have been honorably discharged from the military and meet the financial requirements, the VA loan could be a great deal. Because this government program has stayed above the fray of foreclosures, some in the industry feel that its lending standards should be replicated for civilian loans.