VA Loan / Veteran Mortgage News
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AUGUST 2004
VA Credit History Secrets Revealed
We receive hundreds of inquiries each month from active duty military and veteran applicants
concerning their personal credit issues. While there is no short cut to correcting less
than perfect credit, we thought it would be educational to know exactly what credit
standards the VA underwriters are in search of and just how they want lenders to analyze
your credit. So we went directly to the source and have pulled some vital information
from the Revised VA Pamphlet 26-7, Chapter 4, Credit Underwriting.
How to Analyze Credit
The applicant's past repayment practices on obligations are the best indicator
of his or her willingness to repay future obligations. Emphasis should be on the applicant's
overall payment patterns rather than isolated occurrences of unsatisfactory repayment.
Determine whether the applicant (and spouse) are satisfactory credit risks based on a
careful analysis of the credit report and other data.
Rent and Mortgage Payment History
The applicant's rental history and any outstanding, assumed, or recently retired
mortgages must be verified and rated. Housing expense payment is often the best
indicator of how motivated the applicant is to make timely mortgage payments in the future.
Consumer Credit Counseling Plan - If a veteran, or veteran and spouse, have prior
adverse credit and are participating in a Consumer Credit Counseling plan, they
must be determined to be a satisfactory credit risk if they demonstrate 12 months'
satisfactory payments and the counseling agency approved the new credit. If a veteran,
or veteran and spouse, have good prior credit and are participating in a Consumer
Credit Counseling plan, such participation is to be considered a neutral factor, o
r even a positive factor, in determining creditworthiness. Do not treat this as a
negative credit item if the veteran entered the Consumer Credit Counseling Plan
before reaching the point of having bad credit.
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VA Loan Credit Issues
Help with Tough Payments
No lender wants to foreclose on a home, since it's an expensive process. That's why in
recent years loan servicers have worked hard to help borrowers who have fallen behind on
their mortgage payments.
Foreclosure rates have dropped drastically as a result. During the 2001 recession
foreclosures were at lower levels than they were in the 1990-91 recession. Here are some
of the ways loan servicers are helping borrowers today:
- A borrower who resumes making regular payments after falling behind can benefit from partial reinstatement. A repayment plan is agreed to which gives the owner up to a year to make up the missed payments.
- Forbearance plans allow borrowers to suspend payments, or make partial monthly payments, for up to a year. A repayment plan also is set up.
Lenders understand that it's usually an unforeseen event - such as a divorce, job layoff, or health problems - that cause folks to fall behind on their mortgage payments. Letting a lender know about your situation before the loan becomes delinquent provides an opportunity to set up a forbearance plan.
- Loan modification changes the monthly payment to one the borrower can afford. Terms of the loan are altered so that an owner can stay in the house, and continue making the new payments.
In the future some mortgages may allow you to miss a few payments without penalty. You can count on us to provide you with today's best real estate financing tools!
Healthy Economy Boosts Confidence
Consumer confidence has risen in recent months to its highest level in two years, says The
Conference Board. A stronger job market is encouraging Americans to make a home purchase now.
Increased hiring means wages will go up, as employers compete for workers. Some economists also
predict lower energy prices in the months ahead.
Vibrant economy activity means mortgage rates will rise from their artificially low levels in
coming months. Federal Reserve Chairman Alan Greenspan lowered rates to help the economy get
moving again after the 2001 recession. Despite higher rates, home sales continued to set new
records during the summer, says the National Association of Realtors (NAR). "Although we've
been expecting sales to ease, it's clear the market has tremendous momentum," adds David
Lereah, NAR's chief economist.
Making Renovations Easier
Builders are finding ways to insure that future home improvements are easier to do.
For instance, they're making plumbing, heating and cooling, and electrical systems more
flexible. Instead of embedding pipes and wire in walls they now can be placed in
modular conduits under the floors. Workers then can easily get to these utilities, and
change their layout during a renovation.
One reason most of us pursue home improvements is that a house which was ideal a few years
ago no longer fits our lifestyle. Adding a bedroom is easier and costs less if contractors
don't need to open up walls to change a home's mechanical, plumbing, and electrical systems.
Whether your goal is to purchase a new home, buy an older house and remodel it,
or renovate your current residence, we have the experience and loan products to finance
your dream. Contact us soon to find out how easy it can be to get the most out of your home!
Easier to Buy - Now's the Time
Many households who would prefer to live in their own home haven't taken that step. Some
put off buying because they figure they'll move to another town soon. Others believe they
can't obtain financing to make a purchase, even though that often isn't the case.
Unfortunately, too many folks who understand the benefits of owning a home - having a
stable family environment, enjoying ongoing tax benefits, and building wealth as the
property's value rises - aren't aware that buying is easier than they assume.
America's homeownership rate is at an all-time high, so we've come a long way towards making homes
affordable for everyone. Surveys show that last year two-thirds of us believed it was a good time
to make a home purchase. Additionally, Americans typically see a home as a safe investment with
plenty of growth potential. More than four out of five owners say that purchasing a house
gave them a good long-term investment.
Yet some potential owners are missing today's opportunities. Let your friends and family know that
we'll work hard on their behalf when they're looking to buy a house. Our professionalism and
ability to explain complicated financial issues can guide you to positive solutions. Don't
hesitate to call us with your home buying questions.
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