A VA home loan backed by the U.S. Department of Veteran Affairs is typically more flexible than other conventional home loans, but that doesn’t mean qualifying is a done deal.
VA lenders are borrower-friendly and the VA loan process as a whole is accommodating and easy to understand, but some road blocks can pop up along the way.
Here are 3 VA loan hurdles and how they can best be overcome:
- Low Credit Score: The average credit score for non-VA home loans is 756. But VA lenders, such as Mortgages for Veterans, only require a minimum credit score of 620, which is significantly lower than what conventional lenders require. However, if you are unable to meet the 620 minimum requirement, your VA loan cannot go through. In order to avoid this, make sure you know your score. Check your credit before applying for a home loan. Free credit reports are available once a year at annualcreditreport.com. If your score is below the threshold, you will need to do some work before applying for a home loan. The first step is to fix any errors on the report that may be hurting your score. From there, make sure to pay all your bills on time and keep your credit card balances low.
- Recent Bankruptcy or Foreclosure: While a bankruptcy or foreclosure does not completely rule out your chances of getting a new VA home loan, it can derail the process if you are not careful. With a foreclosure or Chapter 7 bankruptcy, you must wait a minimum of two years before applying for a VA loan. With Chapter 13 bankruptcy, you may qualify in 12 months. Once that waiting period has passed, you will still need to provide proof that you have your financial life back on track. You must pay all your bills on time, keep steady employment and reduce your overall debt burden during that period.
- Unstable Employment: Employment stability is hard for lenders to assess. But if you have failed to maintain steady full-time employment in the past two years, that could spell trouble during the mortgage application process. If, for whatever reason, you cannot prove two years of stable employment, there are other options. You will need to present your best case to the lender. A few tips when considering a VA loan are: don’t change jobs during the process; aim for full-time, salaried positions; and get a letter of recommendation from your boss.
These may be easier said than done, but owning a home is hard work. Let us help you keep your mortgage and financial future in good shape. Call us today for a free consultation.
Sources:
http://www.elliemae.com/origination-insight-reports/Ellie_Mae_OIR_AUGUST2015.pdf
http://www.benefits.va.gov/homeloans/purchaseco_eligibility.asp
