Working in the VA mortgage industry for 8 years I get a lot of questions asked regarding everything from credit to inspections. Needless to say, I have been around the block a few times. Today I thought I would post a topic because I have recently started focusing on VA purchases instead of the VA IRRRL program. Now credit becomes a factor of approval whereas the IRRRL does not.
POOR CREDIT DOES AFFECT YOUR LOAN
Back when the subprime market was such a big thing is seemed like anyone could buy a home. The only thing that was affected by bad credit was the interest rate. If someone with bad credit got a loan their interest rate would be anywhere from 7.5% to 10%. The idea was let’s get a home and then when our credit improved the home was just refinanced to a lower rate. Obviously that wasn’t the case because property values dropped and no one could qualify – thus the housing crisis. Now that the mortgage industry is “back to basics” there are fewer home buyers and an ever increasing need to make sure your credit is in good standing. Because of the housing crisis the VA loan has been effected although the program hasn’t changed. What changed was the lenders and their requirements to lend money to Veterans. Here is how the VA analyzes credit – Its the Veterans past repayment practices on obligations. This is the best indicator of his/her willingness to repay future obligations. The Emphasis should be on the Veterans overall payment patterns rather than the credit score and isolated occurrences of unsatisfactory repayment. In the case of adverse data (late payments), satisfactory credit is considered to be reestablished after the Veteran has made satisfactory payments for 12 months after the date of the last late payment. Here is where the lenders have decided that does not work. They have put minimum credit score requirements on VA loans. Usually if the score is not 640 plus there will be no loan regardless of the payment history.
SO WHAT HAPPENS NOW?
Not all is lost. In fact, I have helped many Veterans when they don’t meet the credit guidelines. Over the years, we have gotten much smarter to our approach to getting a Veteran approved. LowVARates has created an in-house credit repair department. Just because you may think you have bad credit doesn’t mean you should not try to own a home. Giving up would be fruitless and a poor decision. Through credit repair, we can increase scores and remove late payments creating a valuable opportunity for a Veteran to own a home.
WHAT ABOUT NO CREDIT?
Having no credit does not automatically disqualify you either. There are several circumstances where a Veteran might be in this situation. Maybe a recently discharged Veteran has not had the opportunity to develop a credit history. Maybe they use cash rather than credit. Some will not use the credit after a BK or credit counseling and enough time has passed that there is no credit. If this is the case then here is what can be considered as credit history: Payment record of rent, utilities, car insurance, health insurance, cell phone bill, etc. If there are in good standing then credit can be issued for buying a home. Keep in mind that this is for Veterans having no credit. These additional payment records will not be used to offset bad credit.
The bottom line is if you (Veteran) are looking at owning a home and you think you have bad credit you still should apply. There are ways to help you and in some cases it might not be right away but through persistence and dedication on both the Banker and Veteran’s part YOU WILL BE ABLE TO OWN A HOME.
If this information has been useful or you have questions about this please feel free to contact me at 1-866-260-1379 ext 222 or email me at Nate@yourvapro.com. Have a great day and as always happy house hunting!