FHA and HUD have recently released new mortgagee letters to their lenders outlining more changes to FHA loans. In short these changes once again prove why VA loans are so much better than FHA loans and why all Military homeowners or buyers should use their VA home loan benefits and the VA loan when buying or refinancing a home.
It is getting more and more difficult and expensive for civilians to buy homes. FHA will soon increase the monthly mortgage insurance premiums you must pay every month if you have an FHA loan and there is also talk that the down payment will soon be raised to 5% from the current 3.5% requirement. FHA now wants higher FICO scores than in years past and frankly because FHA is going bankrupt, they are trying with all their might to make irrational changes in hopes that things get better for them. In my opinion, FHA is on the road to failure.
Now let’s talk about VA loans! VA loans require NO MONEY DOWN, VA loans have absolutely NO monthly mortgage insurance payments and are much cheaper than FHA loans. There is a recent study that shows that VA loans are performing at a much better rate than FHA loans. This basically means fewer people are defaulting and foreclosing on VA loans than on FHA loans. Why is this? From my experience, Veterans are harder working, more reliable and more willing to make the extra sacrifices needed during tough times to ensure their payments are made. A Veteran will do all they can to “not walk away.”
I will tell you that nothing irritates me more than hearing someone who has served in the military tell me that their realtor or agent told them to go FHA or conventional. 9 times out of 10 the VA loan is by far the best option and will have saved the home owner way more money over the life of the loan and of course up front than an FHA loan. Normally it is nothing more than ignorance on the part of the real estate agent. If you are an agent and are reading this and have ever told an eligible Veteran not to use a VA loan, please chime in and let me know why!