Posted on Aug 25, 2022
Why do you need a Downpayment with VA Loan?
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Currently, I have my home on the market and I have a VA loan on the one selling and the one I am buying -but being told I have to bring a rather large downpayment to closing and debt income ratio is the reason. I still have OVER 400K entitlement remaining and I am so lost and wonder if getting a second lender opinion is a good idea because I am lost. Who do you recommend?
Loans
VA Loan
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Posted >1 y ago
Responses: 13
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We got a VA Loan for our first house in Chicago. When we moved to Tennessee because we had excellent credit with the mortgage company and on our credit report, we didn't need a down payment (but we put one down anyways to reduce the monthly payment). If your credit is in A1 shape, you should be able to work with a lender for a no down payment loan. Shop around. When you sell your house take the money and put it on the loan and knock a few years off of the loan. I wish you luck.
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Veterans United is an awesome VA centric organization. My wife and I closed on our 2nd house 6 months ago - smooth sailing the whole way.
https://www.veteransunited.com/
Ask for Andy Strubel.
https://www.veteransunited.com/
Ask for Andy Strubel.
Veterans United Home Loans | #1 VA Lender for Homebuyers
We help Veterans become Homeowners. See why more Veterans and military families chose Veterans United for their VA home purchase than any other lender in 2021.
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It invariably all comes down to the cash flows and who in the end is going to hold the loan to maturity and how that interacts with the investment markets.
When I was in banking (MBA and CFA) administering investments in bonds, mortgages and auto loans all that experience taught me where the money REALLY goes.
Long and the short of it is loan are churned over and over and over. There are those that process the loan, and then there are those the fund the loans, and finally those that hold the loans as an investment.
In the process of loans people need to get PAID!!!!! Otherwise there is no one to actually bother processing the loan. The funds usually available to make sure people actually get PAID ends up coming out of the borrower's down payment.
Where there is no or little down payment then the funds have to come out of the value of the loan when sold on the secondary market as an investment security. I get a sense the investment markets are just less willing to do that. Therefor increasing the need for larger down payments.
Down payments are also a buffer against an expectation of housing prices going down and lengthen the time time until the property falls into the negative equity zone.
When I was in banking (MBA and CFA) administering investments in bonds, mortgages and auto loans all that experience taught me where the money REALLY goes.
Long and the short of it is loan are churned over and over and over. There are those that process the loan, and then there are those the fund the loans, and finally those that hold the loans as an investment.
In the process of loans people need to get PAID!!!!! Otherwise there is no one to actually bother processing the loan. The funds usually available to make sure people actually get PAID ends up coming out of the borrower's down payment.
Where there is no or little down payment then the funds have to come out of the value of the loan when sold on the secondary market as an investment security. I get a sense the investment markets are just less willing to do that. Therefor increasing the need for larger down payments.
Down payments are also a buffer against an expectation of housing prices going down and lengthen the time time until the property falls into the negative equity zone.
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CPT (Join to see)
Cpl Vic Burk - So, yea, it personally happened to me. I literally got my credit score to 850. I watched it go up and down a few points, month to month and I narrowed it down to the automatic payment cycle of my Credit Card account (pay balance in full). So I could keep my 850 constant if I remembered to pay off the balance a week before the automatic payment schedule.
Anyway.............. last year, when I sold my house and zeroed out my mortgage balance (now living in my spouse's house, so I have no debt other than a revolving credit card that pays in full automatically) my 850 credit score has fallen between 832 and 834.
WTF??? Right????
Getting rid of all my debt and now only have minimal credit card balance that is always paid in full has cost me 18 credit points.
What it comes down to is one without debt doesn't have the DATA to EVALUATE one's credit worthiness in the event they take on debt. The data going into the calculations is constantly being updated.
I'm curious myself what would happen if I even closed out all my credit/debit cards, and went completely CASH and CHECK. None of the utilities is auto paying out of accounts in my name.
How low will my credit score go if I minimize the data sources of my credit score calculation.
I still need to be paid via direct deposit (checking account) and I still have a Gov Travel Card in my name so I'll always have some sort of data for credit scores to evaluate.
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On the other side of that experience, when I was young, and still new in my banking career I was constantly getting Credit Card offers.
So ONE DAY.......... I decided to accept EVERY SINGLE CREDIT CARD OFFER that was sent to me. Eventually I nearly had twice the credit card lines available to me than I made in an entire year. Finally, I started getting rejected.
I wish I looked up my credit score then. But I just wanted to see how much I could get in credit lines (nearly twice my annual income). It wasn't the time where we could just check our credit balance anytime we wanted.
Anyway.............. last year, when I sold my house and zeroed out my mortgage balance (now living in my spouse's house, so I have no debt other than a revolving credit card that pays in full automatically) my 850 credit score has fallen between 832 and 834.
WTF??? Right????
Getting rid of all my debt and now only have minimal credit card balance that is always paid in full has cost me 18 credit points.
What it comes down to is one without debt doesn't have the DATA to EVALUATE one's credit worthiness in the event they take on debt. The data going into the calculations is constantly being updated.
I'm curious myself what would happen if I even closed out all my credit/debit cards, and went completely CASH and CHECK. None of the utilities is auto paying out of accounts in my name.
How low will my credit score go if I minimize the data sources of my credit score calculation.
I still need to be paid via direct deposit (checking account) and I still have a Gov Travel Card in my name so I'll always have some sort of data for credit scores to evaluate.
******************
On the other side of that experience, when I was young, and still new in my banking career I was constantly getting Credit Card offers.
So ONE DAY.......... I decided to accept EVERY SINGLE CREDIT CARD OFFER that was sent to me. Eventually I nearly had twice the credit card lines available to me than I made in an entire year. Finally, I started getting rejected.
I wish I looked up my credit score then. But I just wanted to see how much I could get in credit lines (nearly twice my annual income). It wasn't the time where we could just check our credit balance anytime we wanted.
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Cpl Vic Burk
CPT (Join to see) - Insane! Punishing you because you don't carry a debt load. What a crock of $hit?!!!
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LCpl Sidney Green
CPT (Join to see) - I'm pretty sure those point wouldn't make any significant difference in your overall credit worthiness. Although nobody likes to see their rating go down.
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LCpl Sidney Green
Cpl Vic Burk - There is absolutely no benefit to carrying zero debt (other than your peace of mind). And yes, the credit industry is a scam. In fact, if I recall correctly, there was legislation to change the system from private agencies to government and put an end to all those ridiculous credit score penalties. But it seems to have fallen by the wayside.
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