VA Loans Outperform FHA Loans. Why? And What Can We Learn?

VA Loans Outperform FHA Loans. Why? And What Can We Learn?

Veterans Administration (VA) loans have consistently performed better than Federal Housing Administration (FHA) loans. In this commentary, we take a closer look at both programs to identify why VA loans perform better. We conclude that the residual income test may be a critical differentiating factor and suggest that regulators evaluate whether the test might be a good supplement to FHAs current assessment of a borrowers ability to pay.

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