Announced late last fall and in the process of being implemented as you read this are some rather important changes in the lending landscape. For FHA loans, the mortgage insurance premium, similar in purpose to the VA funding fee, will have a 0.50% drop in the annual cost. And on the conventional side, a 3.00% down payment program is also in the works. It seems as if regulators are making loans easier to get. While there aren’t any significant changes to VA loans, doesn’t it appear that lower down payments and lower costs might lead to a higher rate of default?
That’s never been an issue with VA loans, even with the zero down payment feature. It’s a well-known fact that VA mortgages have the lowest default rate of any widely available home loan in today’s environment. A lower down payment doesn’t automatically mean a default is on the horizon. Military members however pay close attention to their credit histories for reasons beyond handling monthly debt. Poor credit can have other negative impacts. A poor credit history might affect your security clearance. Poor credit can hinder a promotion.
The Department of Defense wants its soldiers to pay attention to their mission and not worry about a collection account or harassing phone calls. Collection companies are often close to the edge as it relates to proper collection practices and some can be downright threatening as well as illegal. Military personnel and reservists know full well that responsible payments to creditors have an impact far beyond a credit score. It can affect much, much more than that. Defaults have little to do with down payments. VA loans are bona fide proof.
