The VA

Apache is functioning normally

Apache is functioning normally

Ready to buy a home? Whether you’ve already found your dream home or you’re just starting the process, one thing’s for sure—you’ll probably need a home loan. But before you start looking into mortgages, you might need to give your credit score a little evaluation. You need a decent score to get a decent mortgage, but what’s the minimum credit score for a home loan?

The short answer? It depends on a lot of things. If you’re ready to start looking for home loans, but aren’t sure if your score is up to par, we’re to help. Keep reading to learn if your credit score is mortgage-ready.

A Quick Look at Minimum Credit Scores for Mortgages

Mortgages are complex forms of financing, so a lot of factors come into play when you’re applying. Find out more about the minimum credit requirements for these types of loans—and why your credit score even matters—below.

Why Does Your Credit Score Matter for a Mortgage Loan?

Your credit history tells a financial story about you. It lets mortgage lenders better understand whether you’re reliable, how likely you are to pay off your debt and whether your debt-to-income ratio is low enough to allow you to cover your current debt obligations in addition to a new mortgage payment.

If you have bad credit, you may look like a risky investment to potential lenders and you’ll be less likely to get the approval. Or, if you do get approved, you may be required to pay higher interest rates than individuals with a better credit score might pay.

Luckily, you can still get approved for a home loan even with a lower-than-average score. That’s because your credit score is critical, but it’s not the only factor lenders consider. Plus, different types of loans come with different requirements, so you don’t always need a good credit score to qualify.

Get matched with a personal
loan that’s right for you today.

Learn
more

What Credit Score Do You Need to Get a Mortgage?

As stated above, the required credit score really depends on what type of loan you’re looking at. Let’s break it down a bit, defining these types of loans, so you can understand more about mortgages and some of your options.

Credit Requirements for Conventional Mortgage Loans

Conventional mortgage loans are not backed by a government entity. They’re offered via private lenders, including banks and mortgage companies. Typically, you need good credit to qualify for a conventional mortgage. For this purpose, that’s considered to be 640 or higher.

However, if you fall slightly short of that mark, you might still be able to find a lender if your payment history, debt-to-income ratio and other factors are positive. Ultimately, lenders need to know that you’re likely to pay your mortgage as agreed and that you also have the resources to do so.

Credit Requirements for Government-Backed Mortgage Loans

Credit requirements for government-backed loans get a bit more complex. Since these loans are all or partially backed by federal government agencies, lenders may approve you even if you don’t have good credit. However, that doesn’t mean everyone gets approved. Here are some basics about eligibility and minimum credit score requirements for various government-backed mortgage types.

Credit Score Requirements for USDA Loans

These loans are partially backed by the federal government and are available to individuals buying qualifying suburban or rural homes. USDA loan lenders must conduct a thorough review of an applicant’s credit profile. Here are just some of the rules they must apply:

  • If three credit scores are present, they take the middle one. If two credit scores are present, they take the lowest one. If only one or no credit score is present, the lender must do a credit analysis and obtain alternate credit verification.
  • The credit score must be based on at least two trade lines (open accounts) that were active at least 12 of the past 24 months. In short, if you don’t have much credit or you haven’t dealt in credit for years, you may have a challenge getting approved.
  • There must be no significant delinquencies or collection accounts.

Credit Score Requirements for VA Loans

VA loans are available to eligible veterans and their families and are backed by the Department of Veterans Affairs. They don’t require a down payment or private mortgage insurance. The VA does not establish minimum credit score requirements and requires lenders to conduct a comprehensive credit analysis.

VA loans don’t have maximum debt ratios, but the lender has to provide compensating factors that prove they can pay the mortgage if their debt-to-income ratio is more than 41%. Veterans who borrow without a down payment may be limited to mortgages of $453,100 or less.

Credit Score Requirements for FHA Loans

FHA loans are backed by the Federal Housing Administration and are seen as a lower risk by lenders because they’re government-backed loans. This option is a common choice for anyone who qualifies as a first-time home buyer because of its relatively low minimum credit score requirements.

Credit score requirements for FHA loans are:

  • 580 or higher for maximum financing—this means you wouldn’t need a down payment or could have a very small down payment, depending on other factors.
  • 500 or higher for partial financing—this means you’d need at least some down payment orwould need to buy a house for less than it was worth.

You can’t get approved for an FHA loan with a credit score less than 500. Other factors do impact approval, such as your payment history, income and debt level.

Do You Need Good Credit to Refinance Your Mortgage?

A refinance is still a mortgage, so yes, you typically need good credit to get approved for one. Many of the minimum credit scores for home loans above apply to refi loans too. One benefit you get when refinancing is that you may owe less than your house is worth. That could reduce the need for down payments and even help you access better interest rates because the lender has less risk in making the loan.

Has COVID-19 Impacted Mortgage Credit Requirements?

Yes, COVID-19 has impacted minimum credit scores for mortgages. These changes are typically made by each bank. In the early months of the pandemic, uncertainty led many banks to drastically reduce home loans or even put them on hold. For example, in April 2020, JPMorgan Chase changed credit requirements to at least a 700 credit score with a 20% down payment.

However, falling interest rates and improved economic factors caused many banks to loosen requirements in the later months of the pandemic and into 2021. Ultimately, you’ll need to do your research when you’re ready to apply for a mortgage loan to find out what options you might qualify for.

What You Can Do Now

First, check your credit score. You might consider signing up for ExtraCredit. You’ll get access to 28 of your FICO scores—and you’ll see the credit scores that mortgage lenders see. ExtraCredit also has features such as Build It to help you positively impact your credit score if you need to boost it before applying for a mortgage.

Once you have a credit score that’s above 640—or, even more optimally, above 700—you can start shopping for mortgage loans and good rates. And remember that if you do get approved, your credit score also impacts your interest rates. Always ensure you know what your mortgage is going to cost you each month and over the life of the loan.

Source: credit.com

Apache is functioning normally

Apache is functioning normally

Mortgage application activity bounced back from the holiday-shortened prior week but is still running significantly below historic levels. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of application volume, increased 5.4 percent on a seasonally adjusted basis during the week ended September 15. On an unadjusted basis, the Index increased 16 percent compared with the week that started with Labor Day.

The Refinance Index rose 13 percent week-over-week and was 29 percent lower than the same week in 2022.  The refinance share of mortgage activity increased to 31.6 percent of total applications from 29.1 percent the previous week.

The seasonally adjusted Purchase Index gained 2.0 percent compared to the prior week. The unadjusted Purchase Index increased 12 percent and was 26 percent lower than the same week one year ago.

“Mortgage applications increased last week, despite the 30-year fixed rate edging back up to 7.31 percent – its highest level in four weeks,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Purchase applications increased for conventional and FHA loans over the week but remained 26 percent lower than the same week a year ago, as homebuyers continue to face higher rates and limited for-sale inventory, which have made purchase conditions more challenging. Refinance applications also increased last week but are still almost 30 percent lower than the same week last year.”

Added Kan, “The average loan size on a purchase application was $416,800, the highest level in six weeks. Home prices in many markets have been supported by low inventory and resilient housing demand for available homes.”

Other Highlights from MBA’s Weekly Mortgage Applications Survey

  • The average size of a purchase loan, $416,800, was almost $4,000 higher than the prior week while the overall size of loans drifted down from $368,100 to $365,600.
  • The FHA share of total applications was unchanged at 14.2 percent while the VA share dipped to 11.0 percent from 11.3 percent. USDA applications accounted for 0.4 percent of total applications, identical to the previous week.
  • The 7.31 percent average contract interest rate for conforming 30-year fixed-rate mortgages (FRM) was 4 basis points higher than a week earlier. Points were unchanged at 0.72.
  • The rate for jumbo 30-year FRM increased to 7.32 percent from 7.25 percent, with points increasing to 0.80 from 0.72.
  • Thirty-year FHA-backed FRM had a rate averaging 7.08 percent with 0.91 point. The prior week the rate was 7.04 percent, with 0.98 point.
  • Fifteen-year FRM rates declined by an average of 10 basis points to 6.62 percent while points increased to 1.08 from 1.01.
  • The average contract interest rate for 5/1 adjustable-rate mortgages (ARMs) decreased to 6.42 percent from 6.59 percent, with points decreasing to 1.10 from 1.16. 
  • The ARM share of activity decreased to 7.2 percent of total applications from 7.5 percent.

Source: mortgagenewsdaily.com

Apache is functioning normally

Apache is functioning normally

VA disability pay rates in 2023 range between $165.92 to $4,295.92 a month. The Department of Veterans Affairs (VA) publishes the rates annually. The severity of the disability and family circumstances can affect the rate. A claim takes 104.1 days on average to complete

.

The veterans disability compensation programs gives qualifying veterans a tax-free monthly payment to help them financially

. The program supports veterans who were disabled or had a condition that was made worse during military service.

Here’s how veterans disability payments are calculated, how to determine how much you might receive in benefits and how to apply for VA disability.

How are VA disability compensation rates calculated?

The VA calculates a veteran’s disability payment by considering three factors:

  1. The severity of the veteran’s disability.

  2. The number and types of dependents the veteran has.

  3. Whether a family member qualifies for Aid and Attendance benefits.

VA disability payments start with a base rate, which rises with the severity of the disability and the types of dependents

. The VA then adds extra money to the base rate if the person’s spouse qualifies for Aid and Attendance benefits, or if the veteran has multiple dependent children.

Severity of the disability

The VA assigns a disability rating to a veteran after reviewing evidence submitted as part of the benefits application or from military records. The VA requires applicants who don’t have enough medical evidence to support their claims to have a compensation and pension exam — sometimes referred to as a C&P

. This exam confirms that a disability is related to military service.

Disability ratings are assigned as percentages. Specifically, disability ratings rise in 10% increments up to 100% (fully disabled). The percentage represents how much the disability decreases the veteran’s overall health and ability to function.

🤓Nerdy Tip

Veterans who have more than one qualifying disability get a combined disability rating. This rating is not as simple as adding the disability percentages together. For example if a veteran has one disability rated at 50% and a second disability rated at 30%, the combined rating is not 80%. The VA determines a combined disability rating, which it then uses to calculate the monthly payment.

Number and types of dependents

The VA adjusts disability rates for veterans who are financially responsible for a spouse, children or parents in any combination. The VA requires proof of their financial dependency.

A spouse is anyone you have legally married, including someone of the same sex as you. The VA recognizes common-law marriages as well

.

To claim a child as a dependent for VA disability, the child can be biological, adopted or a step-child. Dependent children must be one of the following:

  • Under 18 years old.

  • 18 to 23 years old but unmarried and enrolled full-time as a student.

  • Deemed permanently disabled before turning 18.

Aid and attendance status

Certain family members of qualifying veterans are eligible for Aid and Attendance if they:

  • Require assistance to perform daily care activities such as bathing, preparing food and taking medication.

  • Live in a nursing home because of physical or mental incapacity.

  • Are bedridden.

  • Have 5/200 visual acuity or less in both eyes with glasses or contacts.

  • Have a concentric contraction of vision to 5 degrees or less.

Aid and Attendance is available for the:

  • Spouse of a living veteran.

  • Surviving spouse of a deceased veteran.

  • Permanently disabled children over age 18 who became disabled before turning 18.

  • Surviving parents that already receive Parent’s Dependency and Indemnity Compensation.

If a veteran’s family member qualifies, the VA tacks on an additional amount to their monthly payment.

2023 Veterans Disability Rates

Veteran disability rates are paid monthly. Because they follow the cost-of-living allowances Social Security applies to its benefits, every time Social Security benefits are recalculated to account for inflation, veteran disability rates change as well. This means that veteran disability pay rates can differ from year to year.

There are two categories of veteran disability pay rates: those for unmarried veterans and those for married veterans. Within each category, the combinations of disability rating and different types and number of dependents determine a veteran’s monthly payment. Because married veterans receive higher rates than unmarried veterans, it is important to double-check that you are looking at the correct table when looking up your rate.

VA disability rates for unmarried veterans

VA disability rates for married veterans

Additional amounts

Veterans with spouses who qualify for Aid and Attendance benefits, and veterans with more than one dependent child get additional funds each month.

Extra funds for spousal Aid and Attendance

Extra funds for additional dependent children

Examples of calculating monthly VA disability payments

Some monthly payment calculations will be more complicated than others, especially those where a veteran has several dependents. The three example scenarios below are calculated using the amounts in the tables above.

Example 1: Unmarried veteran with dependent children and a dependent parent

John has a disability rate of 40% and is unmarried. He has shared custody of three children, and his dad lives with him. Two of his children are under 18, and one child is over 18. His disability payment is calculated as follows:

Base rate: $849.86

Additional child under 18: $40.00

Additional child over 18: $129.00

Total: $1,018.86

John’s base rate is for a veteran who has one child and one parent as a dependent but no spouse. Because one child is included in the base rate, he can only claim the additional amounts for two children. The two children have different rates because one is under 18 and the other is over 18. No additional amount is provided for his dad, because he is included in the base rate.

Example 2: Married veteran with one child

Leanne has a disability rate of 80%. She is married with one child under 18. Her husband does not qualify for Aid and Attendance.

Base rate: $2,212.15

Total: $2,212.15

Leanne’s rate is only her base rate without additional amounts, because her husband and child are included in the base rate.

Example 3: Married veteran with spouse who needs daily assistance

Sarah has a disability rating of 30%. Her wife requires medical aid to help with daily activities when Sarah is not at home, which qualifies her for Aid and Attendance. Her wife has one child under 18 from a previous marriage.

Base rate: $612.05

Aid and Attendance: $56.00

Total: $668.05

Sarah’s base rate includes her wife and her step-daughter. Because her wife qualifies for Aid and Attendance, Sarah receives an additional amount that is also based on her disability rating of 30%.

How to apply for VA disability compensation

If you believe you are eligible for veteran’s disability pay, you’ll need to file a claim for Veterans Affairs to review. Here are the steps to apply.

  1. Decide on an application method. You can submit your application online, by mail, in person at a VA office or with the help of an accredited representative. If you are submitting your claim by mail, you’ll need to download VA Form 21-526EZ and fill it out. Regardless of which method you use, you’ll need to submit supporting documentation. If you need help filing the application and supporting evidence, you can call your regional VA office to ask for assistance.

  2. Gather documentation to support your application. This can include medical records from VA or private doctors and hospitals, as well as statements from people who are familiar with your disability. You do not have to submit your supporting documentation with your claim; however, the VA says that sending in all of your documents together with your application can help them work through the process more quickly.

  3. Submit documentation. Once you have all of your documentation together, submit it with your application to complete your claim. If you filed an Intent to File form or submitted your claim without evidence, gather the documentation and submit it to support your claim.

🤓Nerdy Tip

If you do not have all of your documentation together but want to file a claim, use an Intent to File form instead. The date on which you file the claim becomes your effective date and is still active as long as you complete your claim within 365 days of the effective date. You might qualify for backpay.

Frequently asked questions

How long does it take to complete a claim for veteran’s disability?

The VA says that the average time to complete a claim is 104.1 days as of July 2023, which is about three and a half months.

Am I guaranteed veterans disability if I was injured during military service?

No, every claim for VA disability must be reviewed and supported with medical documentation.

Source: nerdwallet.com

Apache is functioning normally

A powerful hurricane and an approaching three-day weekend may have offset the impact of an improvement in interest rates during the week ended September 1. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of mortgage loan application volume, failed to extend its first increase since mid-July into a second week. The Index decreased 2.9 percent on a seasonally adjusted basis and 5.0 percent before adjustment.   

The Refinance Index decreased 5 percent from the previous week and was 30 percent lower than the same week one year ago. The refinance share of mortgage activity dipped to 30.0 percent of total applications from 30.1 percent.

The Purchase Index was down 2.0 percent and 5.0 percent on seasonally adjusted and unadjusted bases compared to the previous week. It was 28 percent lower than the same week one year ago.

“Mortgage applications declined to the lowest level since December 1996, despite a drop in mortgage rates. Both purchase and refinance applications fell, with the purchase index hitting a 28-year low, as prospective buyers remain on the sidelines due to low housing inventory and elevated mortgage rates,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “The 30-year fixed mortgage rate decreased to 7.21 percent last week, but rates remained more than a full percentage point higher than a year ago, despite mixed data on the health of the economy and signs of a cooling job market. The refinance index dropped to its lowest level since January 2023, driven by a 6 percent decline in conventional refinances.”  

Additional Data from MBA’s Weekly Mortgage Applications Survey

  • Both overall and purchase loan sizes dipped by a little more than $5,000 week-over-week. The average loan was $361,700 and purchase loans averaged $408,800.
  • The FHA share of total applications increased to 13.7 percent from 13.2 percent and the VA share fell to 11.3 percent from 11.6 percent. The USDA share of total applications ticked up to 0.6 percent from 0.4 percent the week prior.
  • The 7.21 percent average contract interest rate for conforming 30-year fixed-rate mortgages (FRM) was down 10 basis points compared to the previous week. Points decreased to 0.69 from 0.73.
  • Jumbo 30-year FRM also had an average rate of 7.21 percent compared to 7.28 percent the prior week. Points rose to 0.76 from 0.66.
  • The rate for 30-year FRM with FHA backing declined to 7.03 percent from 7.10 percent, with points decreasing to 0.95 from 1.09.
  • Fifteen-year FRM rates averaged 6.66 percent with 0.86 point. The prior week’s averages were 6.72 percent and 1.11 points.  
  • The rate for 5/1 adjustable-rate mortgages (ARMs) fell to 6.33 percent from 6.48 percent, with points decreasing to 1.11 from 1.20.
  • The ARM share of activity dropped to 6.7 percent of total applications from 7.5 percent.

Source: mortgagenewsdaily.com

Apache is functioning normally

In less than a month, Fannie Mae is implementing some tough new mortgage guidelines, including a larger minimum down payment requirement.

Come November 16th, the maximum LTV ratio for loans delivered to Fannie Mae will fall from 97% to 95%.

In other words, you’ll need to come up with a 5% down payment if you want to go the conventional route, even for HomePath financing.

The rule change means the “Conventional 97 loan” is essentially a thing of the past, and borrowers with little set aside will probably need to look elsewhere for low-down payment financing.

For the record, Freddie Mac did away with their “Home Possible® 97 Mortgages” back in 2011 after stating that the performance of such loans was “unacceptable.”

Don’t even ask about Freddie Mac’s “Home Possible 100 Mortgage,” which was touted during the housing boom, flanked by this cool little graphic that kind of summed up the default underwriting decision.

The word “yes” was common prior to the mortgage crisis.

Will Fannie Mae Borrowers Flock to the FHA?

Anyway, when the change goes into effect, those seeking to put the least amount of money down will probably have to turn to the FHA, which should send the underserved back to the agency originally created to serve the underserved.

The FHA only requires a 3.5% down payment, though borrowers do need minimum credit scores of 580 to qualify (10% down if score below 580).

However, FHA loans have become a lot less attractive than they used to be, thanks to numerous recent changes to the associated mortgage insurance premiums.

For example, the FHA raised the upfront mortgage insurance premium to 1.75% of the loan amount while also boosting annual insurance premiums.

If that wasn’t enough, the agency also requires mortgage insurance to stay in force for the life of the loan in many cases, instead of being dropped once the homeowner pays down the loan to 78% LTV.

So it’s not a cheap alternative by any stretch, and strengthens the argument to come in with more cash if at all possible.

[See: FHA vs. Conventional for details on that.]

Of course, there’s always the VA and the USDA loan program, both of which do not require any down payment. But these programs don’t work for all borrowers, only military families and those in rural areas, respectively.

Why Is Fannie Increasing the Minimum Down Payment Now?

Well, apparently they didn’t really want to offer the low-down payment loans to begin with.

Over the past several years, FHA loans became super attractive thanks to their low-down payment requirement and relatively low mortgage insurance premiums.

At the same time, private mortgage insurers had overlays in place that limited who could get financing with just 3% down.

So there probably weren’t too many conventional home loans with 3% down being originated over the past several years.

However, as previously noted, FHA loans aren’t very attractive these days, and private MI companies have since loosened underwriting guidelines.

All that said, former would-be FHA borrowers seemed to have made an exodus to Fannie’s 3%-down loan program.

This is evidenced by the fact that private mortgage insurers saw policies on 3%-down home loans nearly double over the past year.

In other words, it appears as if Fannie took note of this and decided to nip it in the bud before it became a “thing” in the mortgage world.

Aside from the down payment increase, Fannie is also banning interest-only loans and loans with terms greater than 30 years, which coincides with the Qualified Mortgage rule set to go live early next year.

Note: Fannie indicated that loans submitted via Housing Finance Agencies are subject to separate LTV ratios, so 3% down could still be a possibility for certain homeowners. Stay tuned.

Update: And just like that, you only need 3% down to get a mortgage again. That didn’t last long…

(photo: Yuma Hori)

Source: thetruthaboutmortgage.com

Apache is functioning normally

Posted on: September 1, 2023

For your next home mortgage, a VA ARM loan can be a great option for eligible borrowers. This loan option could allow you to benefit from a lower interest rate for a number of years.

But before you apply, it’s a good idea to know all the pros and cons of this loan, so you can make the best choice for your financial situation.

Check your VA home buying eligibility. Start here (Sep 1st, 2023)

What is a VA adjustable-rate mortgage?

The VA Adjustable-rate mortgage is backed by the U.S. Department of Veterans Affairs. This mortgage features an adjustable interest rate that can increase, or even decrease during the term of your loan.

How does a VA ARM loan work?

ARM vs. fixed-rate loans: What’s the difference?

Fixed-rate loans

With a fixed-rate loan, your interest rate remains the same each month throughout the loan’s duration.

For example: If your 30-year $400,000 loan has a 5% interest rate, your payment before taxes and insurance would be $2,147.29 per month for the entire 30 years.

ARM loans

With ARM loans, the interest rate is variable and adjusts based on the loan agreement, typically on an annual basis.

For example: If you had a 30-year $400,000 loan with a 5% interest rate, your payment before taxes and insurance would be $2,147.29 the first year, and then that amount could increase to 6% the second year for a payment of $2,398.20.

VA Hybrid ARM loans

A VA Hybrid loan has an interest rate that starts at a fixed rate for a set period of time at the beginning of the loan’s term and then converts to an ARM loan.

Usually, this type of loan is a 3/1 ARM, 5/1 ARM, or 7/1 ARM. This means your interest rate for each type of loan would be a fixed rate for either 3, 5, or 7 years, and then typically adjusts each year after that time based on the Constant Maturity Treasury.

Check your VA mortgage rates. Start here (Sep 1st, 2023)

When is a VA ARM loan a good idea?

When fixed rates skew higher, borrowers may choose to apply for an ARM, since ARM rates typically skew relatively lower than fixed interest rates. Depending on a borrower’s homeownership goals, it could make sense to get an adjustable-rate mortgage, securing a lower interest rate for the beginning of the loan term, potentially with the goal of refinancing once rates come back down.

ARM loans can also work well for borrowers who plan on moving to a new home prior to their rate adjusting.

Pros & cons of a VA ARM loan

Potential benefits of a VA ARM loan include:

More buying power: Applying for a VA ARM loan could give you the ability to buy a more expensive home because the initial interest rate is lower. The payment could be more affordable when your income may also be lower at that time.

Potential savings if you plan to move: If you’re nearing retirement or plan to transfer out of state prior to the interest rate adjusting, then it’s possible to save money when you choose a VA ARM loan because you are avoiding being adjusted to a higher rate.

Interest rates could potentially decrease: Although rates could adjust higher after the introductory fixed-rate period is over, they could also decrease depending on market conditions, which means you could potentially access a lower rate than was available when you secured your mortgage.

Reasons a VA ARM loan may not be beneficial:

Monthly payments could increase: If you’re unable to refinance or move to a new home before the initial fixed-rate period ends, or if you get an adjustable-rate mortgage that consistently increases each year, your payments might increase, making it a more expensive option over the life of the loan.

Less predictable than a fixed-rate mortgage: A VA ARM loan can adjust based on various parameters and potentially increase each year, making it less predictable than a fixed-rate loan that has a more consistent repayment schedule.

A fee is usually required for getting a VA ARM loan: The VA funding fee is usually paid by the applicant when securing a VA loan. This fee can range from 1.25% to 3.3%, depending on the size of your down payment (if any), and whether you’ve previously used your VA home loan benefit.

VA ARM requirements 2023: Who is eligible?

To qualify for a VA ARM loan, you’ll need to meet certain eligibility criteria established by the Department of Veterans Affairs.

Generally, VA loans are accessible to veterans, active-duty service members, and surviving spouses looking to purchase a primary residence.

While the VA sets its own minimum thresholds for borrowers, homebuyers will need to qualify for the individual lender’s financial requirements as well.

Here are some of the documents and information you can expect to be required to provide when applying for a VA mortgage loan”:

Certificate of Eligibility (COE): This document establishes the nature of your military service and confirms your eligibility for the VA home loan program. Your lender can help you request it.

Proof of income: Your lender will want documentation that shows your total income, to confirm you can make the monthly mortgage payment for your house, typically in the form of pay stubs, W-2 forms, and bank statements.

Credit score: The VA itself does not set a minimum credit score to qualify for a VA loan. However, the VA does not issue the loans itself, and your lender will have its own minimum credit score, typically in the ballpark of 620.

Debt-to-income ratio (DTI): Your DTI reflects the amount of your gross monthly income that is allocated to paying debt. As with a credit score, the VA does not set a minimum but most lenders will want to see a DTI that is less than 41%.

Check your VA home buying eligibility. Start here (Sep 1st, 2023)

Understanding your VA ARM loan payments

Loans typically adjust once per year. There are limits, known as caps, that determine how much the rate can be adjusted — including how much it can change yearly and over the life of the loan.
For example, if a loan is written as a 1/1/5, that would mean the first time it’s adjusted, it could go up or down by a maximum of 1%, and then the next year it could go up or down by 1% again. However, the most it could adjust during the lifetime of the loan is 5%. Understanding the maximum caps gives you the ability to determine if the maximum loan repayment is feasible for you to repay in the future.

Check your VA mortgage rates. Start here (Sep 1st, 2023)

VA ARM loan FAQ

What is a VA ARM?

A VA adjustable-rate mortgage — or VA ARM loan — is a type of VA loan available to veterans who qualify based on the duration of their active military service.

Does the VA offer ARM loans?

The VA doesn’t fund the loans directly, instead, they insure a portion of the loan so private lenders offer affordable home loans to veterans. That said, it is possible to get an adjustable-rate loan that is guaranteed by the VA.

What is a 5/1 ARM VA loan?

A 5/1 ARM VA loan is an adjustable-rate VA loan that has an initial fixed rate that lasts for the first five years of the loan and then converts to an adjustable-rate loan with rate adjustments each year after that initial five-year period.

Is it hard to qualify for an ARM loan?

How difficult it will be to qualify for an ARM loan depends on the specific financial situation of the loan applicant. The mortgage lender will make a determination, typically based on the borrower’s income, credit, and DTI.

When does an ARM loan make sense?

An ARM loan makes sense for homeowners who anticipate they will sell the house within a few years — before any rate changes kick in.

Bottom line: Benefits of a VA ARM loan

Once you know exactly how a VA ARM loan can benefit you and your family, it brings you one step closer to home ownership.

A VA ARM loan features all of the benefits of a VA loan, including:

  • No down payment required
  • Relatively low mortgage rates
  • Flexible credit score requirements
  • No mortgage insurance required

All of these benefits mean a VA loan can be a great option for eligible borrowers.

Check your VA home buying eligibility. Start here (Sep 1st, 2023)

Source: militaryvaloan.com

Apache is functioning normally

After falling for five straight weeks, mortgage applications finally gained a little ground last week. The Mortgage Bankers Association (MBA) said its seasonally adjusted Market Composite Index, a measure of mortgage loan application volume, increased 2.3 percent during the week ended August 25 and was 1 percent higher before adjustment.

The Refinance Index was up 3 percent week-over-week although it still lags August 2022 levels by 28 percent. The refinance share of mortgage activity increased to 30.1 percent of total applications from 29.5 percent the previous week. It was the largest share for refinancing since mid-February.

The seasonally adjusted Purchase Index rose 2 percent and eked out a 0.3 percent gain before adjustment. Purchasing was 27 percent lower than a year earlier.

“Mortgage rates were mostly unchanged last week, with the 30-year fixed rate remaining at 7.31 percent – the highest since December 2000. Treasury yields peaked early in the week and did move lower by the end, which may have spurred some activity,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Mortgage applications for home purchases and refinances increased for the first time in five weeks but remained at low levels. Purchase applications increased but were still 27 percent lower than a year ago, as elevated mortgage rates and tight housing inventory continue to weigh on home buying activity.”

Added Kan, “The refinance market continues to be slow despite last week’s gain, which was driven by a 7.9 percent spike in conventional refinances. Government refinance applications dropped more than 10 percent last week.”  

Highlights from MBA’s Weekly Mortgage Applications Survey

  • Loan sizes increased by about $5,000 to an average of $367,200 while purchase loan sizes grew from $407,700 to $413,100.
  • The FHA share of total applications decreased to 13.2 percent from 14.3 percent and the VA share was unchanged at 11.6 percent. USDA applications accounted for 0.4 percent of the total, down from 0.5 percent the prior week.
  • The rate for conforming 30-year fixed-rate mortgages (FRM) remained at an average of 7.31 percent and points eased back to 0.73 from 0.78.  
  • The jumbo 30-year FRM had a rate of 7.28 percent, 1 basis point higher than the prior week. Points fell to 0.66 from 0.84.
  • FHA-backed 30-year FRM had an average rate of 7.10 percent with 1.09 point. The prior week the rate was 7.09 percent with 1.20 points.
  • Fifteen-year FRM rates averaged 6.72 percent, unchanged from the prior week. Points increased to 1.11 from 1.06.
  • The average rate for 5/1 adjustable-rate mortgages (ARMs) dipped 2 basis points to 6.48 percent, but points jumped to 1.20 from 1.03.
  • The ARM share of activity was 7.5 percent compared to 7.6 percent the previous week.

Source: mortgagenewsdaily.com