VA Loans Vs. Conventional Mortgages
VA loans have some different rules and regulations than conventional loans, but there are plenty of ways where the requirements are similar.
VA loans offer several advantages over their conventional loan counterparts, but when it comes to applying and being approved for credit, some of the VA loan process is similar to conventional loans.For example, there are income requirements, an examination of credit history, and verification of income and previous residency.
One of the major differences with a VA loan is that the borrower’s credit score is not necessarily a deciding factor. The repayment history has a great deal to do with getting approved. A borrower can have less-than-perfect credit and still get approved for a VA mortgage if the last year or more shows the borrower paying reliably and with stable income.
Does a conventional loan offer more forgiving terms compared to this? Compare and contrast VA loans with conventional equivalents. Some published articles on the lending industry quote a required credit score of 620 or better just to qualify for a conventional loan.
Another important thing to consider about VA loans vs. conventional home loans is that once you’re approved for a VA mortgage, you have access to some types of VA fast-track refinancing with no credit check required for qualified applicants under the right circumstances. Ask a conventional lender if the same is true for their home loans and compare terms. You may be surprised at what you learn.
When it comes to income, debt and the ability to pay, VA mortgages are more forgiving than some conventional loans. The maximum debt-to-income ratio for VA home loans is 41%. The borrower can’t have debts that take up any more than 41% of the verified income, unless the borrower has supplemental income that can be included in the ratio.
Can a spouse’s income count as income, supplemental or otherwise? According to VA loan rules, the VA lender can’t ask the borrower about a spouse’s income and it will not be counted on the borrower’s behalf unless there are specific circumstances that apply:
· The spouse is “contractually liable” for the VA loan
· The applicant relies on the spouse’s income to qualify
· The applicant depends on alimony, child support, or separate maintenance payments from the spouse or former spouse or the applicant resides in a community property state or the property to be purchased is in a community property state.
These income requirements may not be present for some conventional mortgages, but borrowers should examine their options carefully before deciding for or against a VA home loan or conventional equivalent. Real estate experts, consumer credit counselors and the VA’s own staff advise borrowers to make the most informed decision possible before applying for the loan of their choice.
At the end of the day, it’s about getting the most loan for your money at the most favorable terms. The VA is ready to help if and when a borrower decides a VA loan is the best choice.