FHA Versus VA Loans On Collections And Charged Off Accounts
This Article Is About FHA Versus VA Loans On Collections And Charged Off Accounts
Many home buyers go with FHA Versus VA Loans even though they qualify for VA Home Loans:
- This is because most Lenders have overlays on VA Loans
- Borrowers do not realize that the VA does not have minimum credit score requirements
- VA also does not have a debt to income ratio requirements
- A perfect example, a particular lender that has minimum credit score requirements of 580 credit scores to qualify for an FHA Loan
- However, the same lender requires a 620 FICO on VA Loans
- The 620 credit score requirement is not a VA Guideline
- BUT that particular lender has overlays on VA Loans
- Unfortunately, many borrowers do not realize that with some lenders, it is easier to qualify for FHA Versus VA Loans
- We will discuss FHA Versus VA Loans on this BLOG
Mortgage guidelines on collections and charged-off accounts on VA and FHA loans.
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 are originated and funded in the United States
- Every American can qualify for FHA Loans
- BUT not every American can qualify for VA Loans
Need to be a Veteran with a Certificate of Eligibility to qualify for VA Loan Program.
HUD 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 lower than 580 FICO and down to 500 Credit Scores can still qualify for FHA Loan but needs a 10% down payment
- For borrowers who have credit scores between 580 and 619 FICO, the maximum debt to income ratio requirements is 31% front end and 43% DTI to get an approve/eligible per automated underwriting system
If you have credit scores of at least 620 FICO, back end debt to income ratio can be as high as 56.9% DTI:
- 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
- Can qualify for two years after a Chapter 7 Bankruptcy discharged date
- Can qualify three years after the recorded date of a foreclosure and deed in lieu or sheriff’s sale
- Can qualify three years after the short sale date of a 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 have been deferred for more than 12 months.
VA Guidelines To Qualify For Home Loans
Not everyone can qualify for a VA Loan.
To qualify for a VA Loan, borrowers 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 VA Loans
- However, most lenders will have a minimum credit score requirement on VA Loans
- Gustan Cho Associates has no overlays on government and conventional loans
- Many lenders require 620 minimum credit score requirement even though the Department of Veterans Affairs does not have minimum credit scores
- Most Lenders will require a 620 to 640 FICO Credit Scores
- Credit Score requirements by Lenders are Overlays and not a requirement
- There is no debt to income ratio requirements
There are VA Residual Income Requirements:
- Residual Income is the money that is left over after 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 pay off to qualify
- Can qualify two years after a Chapter 7 Bankruptcy discharged date
- Can qualify two years after the recorded date of a foreclosure or deed in lieu of foreclosure
- Can qualify two years after a short sale date which is reflected on the HUD-1 Settlement Statement of the short sale
Deferred Student Loans that have been deferred for more than 12 months are exempt from debt to income ratio calculations on VA loans.
VA Loans With Low Credit Scores And High Debt To Income Ratio
Borrowers with a Certificate of Eligibility who were told by the lenders they do not qualify for FHA Loans and not a VA Loan, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at [email protected] VA Loans are the easiest mortgage programs to qualify for. Homebuyers told they only qualify for an FHA Loan and not VA Loan, the chances are that the lender has a lot of Overlays on VA Loans.