FHA Versus VA Loans

This BLOG On FHA Versus VA Loans Was Written By Gustan Cho

Many VA borrowers go with FHA Versus VA Loans because most VA Lenders have overlays on VA Loans. Veteran borrowers do not realize that VA does not have minimum credit score requirements and debt to income ratio requirements. A perfect example, a particular mortgage lender has minimum credit score requirements of 580 FICO credit scores to qualify for a FHA Loan, however, to qualify for a VA Loan, that particular lender requires a 620 FICO credit score. The 620 FICO credit score requirement is not a VA Guideline BUT that particular mortgage lender overlays on VA Loans.  Unfortunately, many Veteran borrowers do not realize that it is harder to qualify for FHA Versus VA Loans. We will discuss FHA Versus VA Loans on this BLOG.

Requirement Of FHA Versus VA Loans

FHA is hands down the most popular mortgage loan program in the United States. There are far more FHA Versus VA Loans that is originated and funded in the United States. Every American can qualify for FHA Loans BUT not every American can qualify for VA Loans. You need to be a Veteran with a Certificate of Eligibility to qualify for VA Loan Programs . 

Here Are The Basic FHA Guidelines To Qualify For A FHA Loan

  • Minimum Credit Scores Required to qualify for FHA Loan with a 3.5% down payment is 580 FICO
  • Borrowers with under 580 FICO Credit Scores can still qualify for FHA Loan but needs 10% down payment
  • Borrowers who have credit scores between 580 FICO and 619 FICO, maximum debt to income ratio requirements is 43% DTI
  • If you have credit scores of at least 620 FICO, your back end debt to income ratio can be as high as 56.9% DTI and your front end debt to income ratios are capped at 46.9% DTI to get an approve/eligible per Automated Underwriting System
  • Outstanding Collections and Charge Offs do not have to paid to qualify for a FHA Loan
  • You can qualify for a FHA Loan two years after a Chapter 7 Bankruptcy discharge date
  • You can qualify for a FHA Loan three years after the recorded date of a foreclosure and deed in lieu or sheriff’s sale
  • You can qualify for a FHA Loan three years after the short sale date of your short sale that is reflected on the HUD-1 Settlement Statement
  • Deferred Students Loans are no longer exempt from the calculations of deferred student loans that has been deferred for more than 12 months

Here Are The Basic VA Guidelines To Qualify For A VA Loan

  • Not everyone can qualify for a VA Loan. To qualify for a VA Loan, you need to be a Veteran with an honorable discharge and a valid Certificate of Eligibility also referred to as COE by the United States Department of Veteran Affairs
  • There are no minimum credit score requirements to qualify for a VA Loan, however, all lenders will have a minimum credit score requirement. The lender that I represent has a 580 minimum credit score requirement to qualify for a VA Loan. Most VA Lenders will require a 620 FICO to 640 FICO Credit Scores to qualify for a VA Loan. Credit Score requirements by VA Lenders are VA Lender Overlays and not a requirement by VA Guidelines
  • There is no debt to income ratio requirements on VA Loans. There is VA Residual Income Requirements¬†which is the money that is left over after the Veteran borrower has after paying his or her mortgage payments, minimum revolving credit card debts, auto loans, and installment debts. The residual income is what is the money that is left over to pay for groceries, child care, school, utilities, and other expenses. The Residual Income Requirement is what plays a factor in getting an approve/eligible per AUS Findings on VA Loans With Low Credit and VA Loans With Higher Debt To Income Ratios
  • Outstanding Collections and Charge Off Credit Accounts do not have to paid off to qualify for a VA Loan
  • You can qualify for a VA Loan two years after a Chapter 7 Bankruptcy discharged date
  • You can qualify for a VA Loan two years after the recorded date of a foreclosure or deed in lieu of foreclosure
  • You can qualify for a VA Loan two years after a short sale date which is reflected on the HUD-1 Settlement Statement of the short sale
  • Deferred Student Loans that has been deferred for more than 12 months are exempt from debt to income ratio calculations

VA Loans With Low Credit Scores And High Debt To Income Ratio

If you are a Veteran borrower with a Certificate of Eligibility and consult with a lender and the lender tells you that you qualify for a FHA Loan and not a VA Loan, please contact me at 262-716-8151 or email me at gcho@gustancho.com. VA Loans are the easiest mortgage loan programs to qualify for. If you are told that you only qualify for a FHA Loan and not VA Loan, the chances are that the lender you consulted with has a lot of VA Lender Overlays.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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