FHA vs. VA

[NJQT]

Ok, so we started out this process with the intent of using my husband's VA loan. We found a new construction with Ryan Homes that was built by another buyer which fell through for whatever reason. They reduced the price and we went under contract for it. We started out with NVR and my score was 5 points away from 620 so they moved us to another broker at a different company who worked with me to get my score up. Well my score is up to 645 and my husband's 647. The new broker is telling us that VA is way more stringent than FHA and that she is having a hard time getting us approved with VA. She wants us to go FHA with a now 3.5% down payment and PMI. We have already given Ryan Homes $3,000 in earnest money, and the broker just last week had us pay off the last 2 collections which totalled  about $2600.00. She told us that we should be fine with VA once we pay those off, now she is singing a different tune and wants us to go back to FHA, but now our down payment is $2600.00 less due to her having us pay those two collections. What are we supposed to do? I'm so over this!!

[MovingForward_2012]

Can you check with your housing authority for programs that compliment FHA? Our state has a great program where my 3.5% down was put in a second mortgage. There may be downpayment assistance grants you qualify for as well.

[NJQT]

Thank you, I am going to look into this now!

[MovingForward_2012]

You're welcome and good luck!

[HoldingOntoHope]

I'm not really sure why the broker is telling you VA is so stringent. I did have to pay off a couple of old debts but beyond that with VA it was either your score and DTI qualified past their threshold or it didn't. My score was slightly lower than yours when I got the initial mortgage. But there was no "Well at 620 you get this, at 670 you get this rate" type thing. My initial mortgage was with USAA. If you are not tied to this broker for builder incentives you may want to call a VA loan broker / bank and work with them.

[NJQT]

@Holding thanks for your insight. When did you buy your home? This broker is making it seem like we have no chance of getting a VA loan.

[HoldingOntoHope]

I bought in 02/11. But VA guidelines haven't changed. If they had the board here would have exploded with information about the changes. My experience with USAA was not totally positive but some of that had to do with the circumstances of the sale (short sale) and some of it was my loan officer / USAA underwriters (resubmitting paperwork, missed deadlines). I recently did a streamline refinance with NFCU and it was remarkably easy to deal with them. But there are also a variety of VA loan brokers out there who advertise regularly. If you are interested just ask a local realtor who they recommend for VA loans. I think your current broker is blowing smoke up your skirt.

[AVierra]

For what it's worth (not as a solicitation, but just so you know I really do know what I'm talking about):  VA loans are my specialty as I'm a Branch Manager for a company in CA. 

Unfortunately, many Loan Officers and real estate agents aren't versed in VA loans and (out of ignorance of the loan's benefits) steer Vets away from the loan and into FHA.

Based on what you've said, you should be fine for a VA loan (fico is fine).  Only issue you may have is that the property sounds like it's new construction which can create some extra hoops, but not that can't be overcome.

Bottom line:  VA is the least expensive, lowest rate option, especially for those with less than 20% for a down payment.