Are Fannie Mae and Freddie Mac's newly announced 3% down program just another case of trying to prove how quickly we forget the past, or is a good move?
I always see posts about how we need to go back to 20% down payments so buyers have more to lose to minimize defaults. However, loot at the VA Home Loan. It has the least down payment . . . $0 yet it consistently over the years has the lowest default rate.
Doesn't that sound like an oxymoron? No when you analyze the differences:
- VA assigned the appraiser, not selected by lender
- VA did a Certificate of Reasonable value double checking the valuation
- VA requires a higher standard on the condition of the home upon sale
- VA was only for home owner occupants - not investment property
- VA has never offered a sub-prime loan
- VA looks at residual income calculations, not just long term revolving debts to determine ratios
- VA is proactive if the veteran starts to go into default - they don't ignore the problem
- VA doesn't outsource their processing or underwriting to some center overseas
Here is a chart showing VA and FHA default rates over the years:
If you can stick it out in the military long enough to get your DD214, you probably learned to make enough adjustments in your life to figure out a way to keep from loosing your house when times got tough. We should take some lessons from the VA mortgage process. If we do, we can help avoid the next mortgage crisis.
Comments (6)Subscribe to CommentsComment