VA loans have thrived in the face of foreclosure. But they haven't been immune to the overall tightening that has recently reshaped the lending industry.
The result is that these flexible loans aren't quite as forgiving as they once were.
More restrictive credit and underwriting standards have no doubt kept thousands of military members from purchasing or refinancing a home in the past two years. VA-approved lenders nationwide have ratcheted up their requirements in the wake of the subprime meltdown. Qualified borrowers can still purchase a home with no money down, but veterans and active-duty service members without a credit score of at least 610 are finding it tough to find financing.
Lenders might start to loosen up a bit in the coming years, but in most cases a more conservative approach to home lending will continue to define the industry and govern the path to homeownership.
For America's service members, the reality is both stark and simple: Building a solid credit profile is more crucial than ever before.
Good Credit is the Gateway
The days of no-document and bad credit loans are gone. Regulations enacted in 2010 have added further layers of protection to the home-purchasing process.
Refinance policies have also become more restrictive. For years, service members could get an interest rate-reducing refinance loan without a credit check or an appraisal. Today, they're paying appraisal fees and seeing their credit scrutinized.
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