Qualified Mortgages and Its Impact on the VA Loan Borrowers

There’s a new type of loan called the ‘Qualified Mortgage’. Most of us have heard of it, especially prospective homebuyers who question the impact that it will have on their home mortgages. For example, retired or active duty military servicemen are speculating about the impact that these changes will have on their ability to get the benefits of a VA home loan.

The financial slowdown of 2008 led to the introduction of numerous stringent rules and regulations. This was done to put restrictions on giving away easy loans and to reduce the possibility of loan defaults. However, such restrictions have made life difficult for borrowers who are looking to buy a home. At the same time, the government has been implementing and modifying new mortgage policies to provide relief to these borrowers, and a Qualified Mortgage is one of them. There are some specific policies that have been implemented by certain U.S states. The perfect example would be the various programs and initiatives being taken by the government in Texas; especially its impact on the veteran home loan in Texas.

What is a Qualified Mortgage?
Qualified mortgages mainly focus on the safety and affordability of prospective homebuyers. During the 2000’s, many lenders provided mortgages to a large number of borrowers who had poor credit scores and who were not in the situation to pay back the loan. These subprime loans were the main reason that contributed to the financial meltdown and led to the collapse of the housing market.

The scenario mentioned above eventually led to the introduction of the qualified mortgage. The qualified mortgage does not have the risky features of other mortgages and it ensures that the borrowers can afford to repay the loans that have been sanctioned. Regulators have also laid down eight credit and underwriting requirements that must be met to obtain Qualified Mortgage status. Mortgage companies can still provide loans that do not meet the standards of a qualified mortgage, but those loans will not get protection as per this regulation.

The Effect on VA home loans
People who are worried about the impact that qualified mortgages will have on VA loans have a reason to smile. The good news is that it will not have much impact on the VA loans. These underwriting guidelines have been followed by most of the lenders over the years. Hence, no additional action needs to be taken to comply with these underwriting requirements.

In fact, VA loan borrowers will get some added advantages as it will limit the costs involved in obtaining a mortgage. It has been estimated that around 92% of the loans that have been taken out meet the requirements of a qualified mortgage. The other 8% of the loans either exceed or have a higher annual percentage rate (APR) than allowed. This shows that the new guidelines will not have much impact on a majority of home loans.