August 5, 2021

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Mortgage News

Why VA mortgage loans go to the bottom of the stack

HW + VA Lending - Couple Home Buying

It was denial after denial for Isabel Williams’ client, a military veteran in Port St. Lucie, Florida. Since the client started looking for her dream home earlier this year, she’s been Veterans affairs Mortgage loan offers have been turned down over a dozen times.

Williams, the broker-owner of We save loans, said her client has all but given up buying an existing home with VA funding. Instead, she wants to buy a newly built house from a large home builder.

Home builders, Williams said, are more concerned about the overall investment and don’t share the same prejudices and misconceptions about VA funding as individuals.

But it could be a while before Williams’ client could actually stop paying rent and move into a house. If she is unable to wait the six months or more to complete construction, she can forego her hard-earned government benefit.

“It may need to move from VA to conventional to better adapt to the current market,” said Williams. “When people decide which offer to take, the pecking order is cash, conventional, FHA, and then VA.”

For lenders representing VA borrowers, the aversion to VA deals is confusing. From a risk profile perspective, in addition to the state guarantee that seasoned borrowers are in command, VA borrowers have much lower default rates than FHA loans, another state-backed loan.

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