BREAKING NEWS: VA Loans During The COVID-19 Pandemic Mortgage Crisis
VA Loans During The COVID-19 Pandemic Mortgage Crisis has been proven to be a challenge for many mortgage lenders.
- The coronavirus pandemic has turned the mortgage markets upside down
- Although mortgage rates are at historic lows, this is for prime borrowers only
- A prime borrower is a mortgage borrower with at least a 740 credit score, 25% down payment, low debt to income ratios, and purchasing and/or refinancing a single-family home
- Anyone with under 700 credit scores will have a harder time and higher mortgage rates during the COVID-19 pandemic mortgage crisis
- This is due to liquidity issues on the secondary mortgage bond markets. Investors of mortgage-backed securities have no interests in investing on mortgages with lower credit scores and higher risks
- Currently, there is no market for government loans for borrowers with under 680 credit scores
- This mentality is expected to change
- Even though VA mortgages is guaranteed and insured by the federal government, investors do not want to touch lower credit score borrowers
- However, the great news is Gustan Cho Associates still originates and funds VA loans with under 620 credit scores
- Gustan Cho Associates has no lender overlays on VA loans during the COVID-19 pandemic mortgage crisis
In this article, we will discuss and cover VA Loans During The COVID-19 Pandemic Mortgage Crisis.
VA Loans During The COVID-19 Pandemic Mortgage Crisis: VA Agency Guidelines Versus Lender Overlays By Lenders
The housing and mortgage markets was stronger than ever prior to the COVID-19 pandemic.
- However, the pandemic has not only halted the U.S. economy, but affected the housing and mortgage industry
- The once strong housing market was shaken by the pandemic
- The once solid mortgage industry came crushing down with uncertainty and major changes
- Non-QM lenders have suspended non-QM loans until further notice
- Many non-QM lenders have gone out of business
- Others are not expected to reopen
- All bank statement loans and alternative financing have been suspended until further notice
- Most mortgage lenders have increased lending guidelines, called overlays, on all of their government and conventional mortgage programs
- For example, most lenders have increased minimum credit score requirements to 660 FICO on all government loans, which includes VA mortgages
- The higher lending standards are not from the government mortgage agencies
- All HUD, VA, USDA, Fannie Mae, Freddie Mac agency guidelines remains the same. However, lenders have jacked up their own lending guidelines, called overlays
In this article, we will discuss and cover qualifying for VA Loans During The COVID-19 Pandemic.
Typical Lender Overlays During The Coronavirus Pandemic Economic Crisis
The team at Gustan Cho Associates are getting countless calls from borrowers who were told they were told they no longer qualify for VA loans during the COVID-19 pandemic economic crisis.
- Many are told they need a credit score of 660 to 680 to qualify for a VA loan
- Others are told they need a debt to income ratio lower than 45% DTI
- Yet others are told they cannot qualify for a manual underwrite during the coronavirus pandemic mortgage crisis
- All of the above examples are lending requirements by the particular lender and NOT the VA
- All lenders need to meet the minimum VA agency lending guidelines
- However, lenders can have their own lending requirements that is above and beyond those of the VA which are called lender overlays
Examples of typical lender overlays imposed by lenders during the coronavirus pandemic includes the following:
- Increased credit score requirements
- Lower debt to income ratio requirements
- No manual underwriting until further notice
- No construction loans
- Other credit/income lender overlays depending on the lender
The great news is Gustan Cho Associates has no lender overlays on VA loans during the coronavirus pandemic mortgage crisis. We just go off the automated findings of the automated underwriting system (AUS).
VA Agency Mortgage Guidelines
VA loans are the best loan program in the U.S. However, only active and/or retired members of the U.S. Armed Services with a Certificate of Eligibility (CEO) are eligible to qualify for VA mortgages. Surviving spouses of veterans who meet the VA agency guidelines are also eligible. Here are the basic VA agency mortgage guidelines:
- 100% financing with no down payment required on home purchases
- Up to 4% sellers concessions allowed by sellers to use it for closing costs
- There are no minimum credit score requirements on VA loans
- There are no maximum debt to income ratio caps on VA loans
- There is no maximum loan limits
- There is no mortgage insurance required
- The VA funding fee can be rolled into the balance of the VA mortgage
Gustan Cho Associates has no lender overlays on VA mortgages. If you need to qualify for a VA loan with no lender overlays during the coronavirus pandemic, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at firstname.lastname@example.org.
May 11, 2020 - 4 min read