Why Do VA-approved Lender Guidelines Differ?

Qualifying for a VA home loan can vary from lender to lender.  Why?  VA loans are originated and funded by private mortgage lenders, banks, credit unions and other lending institutions that are VA-approved.  When a VA-approved lender gives its nod on a loan for a veteran, military member or surviving spouse, the VA knows it can back it up with a 25% guarantee.

The VA provides qualifying guidelines to lenders. And, lenders have flexibility to determine whether a borrower is a satisfactory credit risk.  Since it’s the lender — not the VA — funding the loans, some lenders may have their own qualifying requirements in addition to the VA guidelines.

For instance, the guidelines state no minimum credit score for VA mortgage qualifying.  Yet, most VA-approved lenders require a minimum score, albeit scores for VA loan qualifying are typically much lower than what’s required for conventional loans.

There’s no question qualifying for a VA home loan is more relaxed than qualifying for a conventional loan.  Here’s why we like VA loans:

• No money down for loan up to conforming limits
• Interest rate advantage
• No private mortgage insurance
• Relaxed credit and income qualifying

Zero Down

Lenders consider the federal backing on every VA mortgage in lieu of down payment.

Interest Rate Advantage

Also, many VA-approved lenders offer one low interest rate for qualified VA-eligible borrowers regardless of credit score.  This is known as the interest rate advantage.  Most conventional lenders reserve their best credit scores for applicants with excellent credit and 20% cash to put down.

No Private Mortgage Insurance

Again, federal backing allows VA borrowers to skip the mortgage insurance premiums charged with FHA and conventional loans.

Relaxed Qualifying

41% debt-to-income ratio, lower minimum credit score requirements, and reasonable residual income requirements based on region and family size.

For more information about qualifying for a VA home loan, contact a loan specialist.