Recent Late Payment VA Guidelines And Late Payments After Bankruptcy

This BLOG On Recent Late Payment VA Guidelines And Late Payments After Bankruptcy Was PUBLISHED On June 1st, 2019

VA Home Loans is the best loan program for owner-occupant primary residences.

  • The U.S. Department of Veterans Affairs (The VA) offers 100% financing where no down payment is required by eligible borrowers
  • To qualify for VA Loans, borrowers need to be active and/or retired members of the U.S. Armed Services
  • Eligible surviving spouses of veterans may also be eligible
  • To meet the eligibility requirements by the VA, the borrower needs to have a Certificate of Eligibility (COE)
  • The VA is lenient when it comes to credit/income and Recent Late Payment VA Guidelines
  • The Veterans Administration take into account veterans may have less than perfect credit than their civilian counterparts when deployed or transferred from one military base to another

In this blog, we will discuss Recent Late Payment VA Guidelines. We will cover Recent Late Payment VA Guidelines with AUS Approval Versus Manual Underwriting.

The Automated Underwriting System (AUS) And How It Treats Recent Late Payment VA Guidelines

Recent Late Payment VA Guidelines does not automatically disqualify borrowers with recent late payments in the past 12 months on automated underwriting system (AUS) approval.

  • It is possible to get an automated underwriting system approve/eligible with one of two late payments in the past 12 months
  • However, it will be difficult to get AUS Approval with multiple late payments in the past 12 months
  • The automated underwriting system is a sophisticated technologically advanced computerized system that takes all the data by the borrower
  • Credit, credit scores, payment history, income, assets, liabilities, collections, charge off accounts, recent late payments, late payment history, prior bankruptcy, and housing events, past employment history, and other pertinent information of the borrower and renders an automated approval, refers it to manual underwriting, or a mortgage automated denial within a matter of seconds

The three automated findings are the following:

  • Approve/Eligible which means the AUS approves the file and the borrower meets all VA Guidelines
  • Refer/Eligible which means the automated underwriting system cannot render an automated approval and needs to get downgraded to a manual underwrite
  • Refer with Caution which means the file does not meet VA Guidelines and the borrower is ineligible to qualify for a VA Mortgage

How The Automated Underwriting System Analyzes Borrowers Credit Profile

If the automated underwriting system sees the borrower has a good overall credit payment history, sufficient seasoned credit tradelines, assets, lower debt to income ratios, but one or two recent late payments in the past 12 months, the borrower should get an approve/eligible per AUS.

  • However, if the borrower has a habit of paying their bills late and has recent late payments in the past 12 months, the chances are they will not get AUS Approval
  • Just having a high credit score does not mean a guaranteed AUS Approval

The AUS will review the borrowers overall payment history listed on the consumer credit report.

VA Manual Underwriting Guidelines On VA Home Loans

VA files that do not get an approve/eligible per AUS Findings but gets a refer/eligible can get downgraded to a manual underwrite. However, manual underwriting guidelines apply. Here are the basic VA Manual Underwriting Guidelines on VA Loans:

  • Timely payments in the past 24 months with special emphasis in the past 12 months
  • Verification of rent
  • Gustan Cho Associates allows borrowers who do not have verification of rent if they live rent-free with family members
  • Low payment shock is considered a compensating factor
  • Maximum debt to income ratio up to 54% DTI with compensating factors

Again, mortgage underwriters do have a lot of underwriter discretion on manual underwrites. Just because a borrower has late payments in the past 24 months will not automatically disqualify borrowers. Each case is analyzed and reviewed on a case by case basis.

For more information on this topic or other mortgage-related questions, feel free to contact us at 262-716-8151 or text us for faster response. Or email us at [email protected] Our team at Gustan Cho Associates Mortgage Group are available 7 days a week, evenings, weekends, and holidays.

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