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VA Loans Outperform Other Programs

By: Grant Moon 03/04/15 11:56 am

Earlier this year Fannie Mae announced a new loan program in an attempt to get more people, specifically first timers, into a home with a mortgage requiring only 3.00 percent down, a down payment amount that is even lower than the FHA program which asks for 3.5 percent. Yes, there is a monthly mortgage insurance premium which is rather pricey but the amount of funds needed to buy the home is lowered. Immediately however, the program was decried as a pathway to another housing crisis.
There have been discussions in Congress over recent years about requiring all borrowers who choose a conventional loan must have a 20 percent down payment. Yet various lobbies shoot this idea down pointing out how it would damage the housing industry and the economy as a whole. And those lobbyists are probably right but the idea that someone must come to the closing table with a down payment in order to have a little “skin in the game” is still prevalent in various circles. The idea is borrowers are less likely to default on the loan because they’d lose their down payment money.
If that’s true, then why does the VA mortgage program have the lowest default rate of any mortgage in today’s market? If someone who puts a down payment on a home they’re less likely to default? Maybe, but not as it relates to a veteran using the VA home loan to buy a house. The down payment isn’t the issue. VA guidelines have pretty much stayed the very same since the introduction of the G.I. Bill in 1944. Borrowers using a VA home loan don’t have to have perfect credit, either. For those who criticize low down payment loans, they need to take a harder look at the VA program.

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