The VA mortgage loan program is a federal program that is accommodating, flexible, and favors the US military veteran borrower (you!). But that doesn’t mean VA lenders are willing to shell out money without condition. As a borrower seeking a veterans mortgage loan, you are still required to meet certain standards. If you fall short of those standards, you don’t need to panic. There are tried and true strategies to overcome any obstacle that may stand in your way to securing that VA loan.
Here are some common obstacles veterans and other program-eligible people encounter as they work on getting a VA Loan and into the home of their choice:
Reason 1: Credit Score is Too Low
According to the August 2012 Ellie May Origination Insight Report, the average qualifying credit score for a non-VA loan was 763. At Low VA Rates we will finance a loan with a credit score of 620, and can go lower in many cases. Most VA mortgage lenders will not go below 660. On VA streamline refinance loans we require NO appraisal and NO value determination at all. Almost every other lender does. (On a VA cashout refinance for debt consolidation etc., we go to 100% and all other lenders go to just 90% LTV.)
If your credit score is low, and you know that it is a potential problem, you should begin immediately to correct that situation. Most credit reporting companies use the FICO standard score to establish your credit rating. This pie chart shows how your FICO score is calculated:
As you can see, nearly 2/3 of your credit rating is determined by the amount of debt you carry and your history of paying your creditors on time. A simple and effective strategy to improve your credit score is to pay down your debt, keeping your schedules and commitments without payment delinquencies or non-sufficient funds (NSF) occurrences.
Reason 2: Home is Not in Good Condition
While other buyers will take a property in an “as-is’ condition, VA loan rules require repairs to be completed before escrow closes. VA home loans must be move-in-ready and not require significant repairs. But don’t abandon hope on getting a VA loan if the home you want to live in happens to need repairs. Many foreclosure properties have been damaged by previous owners and are on the market at bargain prices. With a little help, you can determine if the home is offered at a price that offers good value to you even considering the repairs that must be made. If you are buying the home from the current owner, you might be able to work out an agreement about completing the needed repairs so it will qualify for a VA mortgage loan.
Reason 3: Lots of Cash Buyers in the Local Market
Home prices across the US continue to recover from the dramatic drops that occurred in the recent economic downturn of 2011-12. The high number of distressed properties, particularly in regions hit hardest, made an attractive market for investors. Surprisingly, more than 40 percent of homes in some foreclosure-ridden markets were purchased with all cash. Going up against a cash buyer to purchase a home can be a tough row to hoe.
The VA imposes strict requirements on home condition, requiring a home inspection and any needed repairs for things like termite work, damages, and other repairs. So, any kind of mortgage (VA loan, FHA, or conventional loan) takes longer to close than all-cash deals, which don’t even require an appraisal. While the process may seem frustrating, keep in mind that this VA requirement is meant to ensure the value of your new home and protect you as a homeowner.
Reason 4: Impatience
Finally, if you have pre-qualified for a VA loan but have lost out on getting into a specific home for whatever reason, be patient. Now is actually a great time to get into a home. VA interest rates are at historic lows. The home market will continue to stabilize and you will be able to work through the process of getting into a home that feels like home.
Many veterans who successfully qualified for a VA loan exercised a strategy of patience in finding the home of their choice. Many report working through several potential deals until everything fell into place and they could get into the home they desired.
Don’t let a competitive market, a home in need of repairs, or a low credit score deter you from your goal of home ownership. And remember that patience might just be the brightest tool in your bag as you work on getting into that home.