VA Home Loan Versus CFHA Loans
- Publish Date: 2013/05/01 - (Rev. 2019/03/23)
- Author: Thomas C. Weiss
- Contact : Disabled World
Outline: A personal experience and comparison between a CFHA home loan and Veteran Affairs housing loans.
A VA home loan is desirable in part because of the low interest rates associated with it at this time. The rate offered to me as a veteran was just above 3%, something I greatly desired, as well as the protections related to a VA loan. For these reasons I pursued this type of loan before considering other types of home loans first.
What I did not anticipate or have any awareness of as a home buyer was the many hurdles that would present themselves along the road towards home ownership. Veterans are supposedly, 'guaranteed,' a home loan - something to be taken with a grain of salt. As I pursued a VA home loan through the local bank, the paperwork began to flow, and flow it did.
The Long Road Towards a Home Loan
One of the most important items of paperwork required by the VA home loan I pursued was tax returns from the past three years, to include the most recent one. As a person who filed with someone else, I did not have these returns in my possession, so I had to go to the IRS office for copies of the transcripts. As it turns out, I am also someone who is considered to be, 'self-employed,' and what this meant was that I needed a specific type of transcript. I ended up sitting at the IRS office twice because of this.
You can order IRS tax transcripts from previous years for free through an automated phone system from the IRS. However - those transcripts will not display, 'Schedule C,' which presents earnings from self-employment. Receiving transcripts that displayed Schedule C meant going to the IRS office itself.
Dutifully, I went to the IRS office to get the transcript for the years requested. The bank told me I had all of the paperwork needed to close on the house and gave me a closing date. Yet 20 hours before the house was supposed to close and the paperwork signed - here was the bank calling me and asking for the most recent tax year's transcript showing Schedule C; something the bank said they didn't need because the year had not been filed yet.
With fingers and everything else crossed, I went back to sit at the IRS office, hoping they paperwork had been received by the IRS; it had been. The IRS representative was a wonderful person who understood exactly what I was enduring and kind of chuckled with me as I described what I needed and what was going on. It was my impression that he was a fellow veteran.
Once again I waited for the underwriter for the bank to review my file, provide approval, and to receive a closing date from the bank. The closing date was not to come, but for a reason I had not anticipated at all. The VA itself, while examining my credit report, decided that my credit was not, 'perfect enough,' for them and denied my home loan after approving it the first time. My jaw dropped.
If you apply for a VA home loan you had better have a good credit score with no, 'ghosts,' in your credit past whatsoever - no matter how minor they may be. An item from seven years ago for a mere $17 that I did not even know existed found me with a denied VA home loan. I cannot help but get the impression that the VA is unnecessarily picky.
An Additional Hoop to Jump Through
In anticipation of the potential for the VA home loan to fall through, I had researched other types of potential home loans. One of the other types I am eligible for is the Colorado FHA home loan (CFHA), which examines disability income. Fortunately, all of the paperwork I had already turned in in relation to the VA home loan also applied to the CFHA home loan.
One of the, 'hoops,' I was required to jump through in order to get a CFHA home loan was to complete a home ownership class online through a local organization. The class took several hours to complete, and I completed the class before my VA home loan was even denied because I wanted the knowledge it contained anyway. The class cost $50. The hoops were not over yet, as it turned out.
CFHA and a Home Inspection
Something else a CFHA home loan requires is a home inspection. As it turns out, it does not matter who does the inspection, as long as they are qualified to do it. I found a home builder to do the inspection on the home; he simply had to inspect everything and put the information in a coherent format and then submit it to the bank.
The home inspection was then sent off to CFHA, my broker, as well as the seller of the home. No home inspection comes back completely, 'clean,' there are always items that must be fixed. The home I am trying to buy needs a couple of interior doors replaced, some wiring covered, and a ceiling fan replaced.
The Continued Wait
At this time, my file is back in the hands of the underwriter and I am waiting for a yes or no answer as to whether or not I will receive a CFHA home loan. This time around; however, the bank's own computer system shows me as being qualified for the loan, unlike the prior VA home loan which couldn't show any results one way or the other. The bank has stated that I should have an answer within a day or two, something that would be very nice indeed.
Right now I am living in a rented house where I can keep my hearing assistant dog and my cat. As a veteran with disabilities, the jumps to go through just to get a home to live in have been horrendous. With the understanding that the housing finance industry has gone through a financial collapse in America, I am still incredulous at the increase in the strictness related to purchasing a home. There are many people with disabilities in this nation who just want a place to live in and call their own and there is absolutely no way my experience is the only one in America.
The bank representative I am working with has told me there is another person with disabilities who is going through the exact same situation I am in at the same time I am, right here in this same town. Pueblo, Colorado is not the largest city in America. While attempting to purchase this home I have now lived in four different places, have been unable to turn in a change of address, found myself running around to gather and then turn in endless paperwork, and moving my possessions from place to place - it is highly disruptive to say the very least.
People who have served this nation and people with disabilities should never, ever have to deal with such an ordeal. The home buying process in America has become so convoluted as to be ridiculous. The VA and the banks in this nation are treating the home buyers as if we are in last place while the sellers of homes have to jump through just as many hoops as we do. There has to be a better way.
Federal Housing Administration (FHA) Loans
In 1965 the Department of Housing and Urban Development (HUD) was formed. Within HUD operates the Federal Housing Administration (FHA), which has the primary responsibility for administering the government home loan insurance program. This program allows a first time home buyer who might otherwise not qualify for a home loan to obtain one because the risk is removed from the lender by FHA who insures the loan for the lender. The main advantage to a FHA home loan is that the credit criteria for a first time borrower are not as strict as Conventional Loans sold to Fannie Mae (FNMA) or Freddie Mac (FHLMC). FHA loans are available to anyone, whether your first or fifth home and can be used to purchase a home or refinance a home. For further information please visit fhagovernmentloans.info