VA loans have been around for quite a while and seem to be more popular than ever after the subprime mortgage meltdown in the last few years. The VA loan program is offered to both Veterans and active-duty military personnel to help them get home financing with guidelines that are somewhat more flexible than traditional financing.
And yes, it is true that the Veteran's Administration home loan program allows eligible veterans to buy a house with no money down. That is probably the most-marketed feature of VA loans: "buy a home with no money down".
But there are still a few things about the VA loan program that I personally think could be improved - and here are three items that I could see improving VA home loan financing:
Allow some closing costs to be charged to the Veteran that are not currently allowed.
Currently, there is a list of "non-allowable closing costs" and in theory, it was designed to protect Veterans from paying unnecessary closing costs. What happens in real-life is that lenders just increase the allowable closing costs allowed on a VA loan in order to offset the VA non-allowable closing costs.
Some of the closing costs are "real" costs -- and what happens is that if the lender doesn't want to pay them, they just push the Veteran into another loan program that may not be as beneficial as the VA loan.
Getting a VA appraisal done could be quicker and easier.
Even before HVCC, the VA appraisal process was "long and wrong". Most people in the industry know that the VA appraisal process will take a long time and many times the VA appraisal will not reflect a home's true value. True, an inflated appraisal is not a good thing, but neither is an appraisal that comes in lower than the homes value - it impacts the Veterans ability to buy or refinance the home.
Non-spouses could be allowed to co-sign.
There are many different circumstances surrounding a Veteran wanting to buy a home due mostly to the deployment of so many Veterans and active-duty military people over the last few years. So in some cases where a veteran does not make enough money to qualify, it may make sense to allow a parent to co-sign for the VA loan (similar to the FHA kiddie condo rules). Currently, under VA loan rules this is not permitted.
Regardless of whether or not these three changes were made to the VA loan program, it is still a great way for Veterans to finance a home.
But these three ideas may make it even better.