Can I Qualify For VA Loan With Poor Credit?

This ARTICLE On VA Loan With Poor Credit Was Updated On March 18, 2017 By Gustan Cho NMLS of Nationwide Mortgage & Realty LLC 

The answer is YES. Veterans can qualify for VA Loan with poor credit.

Here are VA Loan With Poor Credit Requirements:

  • Veterans can qualify for VA Loans after filing Chapter 7 Bankruptcy as long as they meet a two year waiting period after the discharged date.
  • There is a two year waiting period to qualify for a VA Loan after the recorded date of foreclosure, deed in lieu of foreclosure and after a short sale.
  • VA Loan With Poor Credit is much easier than FHA Loans With Poor Credit .
  • VA requires on a two year waiting period after foreclosure, deed in lieu of foreclosure, short sale versus FHA requiring three years.

VA Loan With Low Credit Scores

VA does not require a credit score the minimum credit score requirement is set by lenders and not VA:

  • We like to see veterans to have credit scores of at least 580. 
  • Veterans can still qualify for VA Loans with under 580 FICO credit scores.
  • The only co-borrowers allowed with VA Loans are spouses of veterans.
  • Non-occupant co-borrowers are not allowed like FHA Loans.
  • VA allows for deferred student loans that has been deferred for long than 12 months to be exempt from debt to income ratio calculations.
  • Borrowers can qualify for VA Loans with judgments and tax liens as long as they have written payment agreements and has been paying on them for at least three months.
  •  Borrowers need to provide mortgage docs including two years of verifiable income via W2s or 1099, two years of tax returns, two months of bank statements and other Documents Required To Process The VA Loan .

History Veterans Administration And VA Loans

In 1944 the VA Loan Program was created and launched to reward our Veterans who have served in the U.S. Military and come back from active duty overseas after World War II. Most military personnel did not have the best of credit nor down payment to purchase a home after serving our country so the VA Guarantee was created where veterans can qualify for a home purchase affordable. The Department of Veteran Affairs made sure that veterans qualified for VA Loan With Poor Credit. Most veterans had poor credit since they were serving in the military during World War II.

Objective Of VA Loans

The major purpose of the creation of VA Loans was to give Veterans the chance of becoming homeowners with preference with regards to making VA Loans obtainable with less than credit required on other loan programs, no down payment, low or no closing costs, lower interest rates, and other hassles and stress non-veteran home buyers go through. For example, many lenders require a number of credit tradelines and some even require a two year seasoning requirement on how long the borrower needs to have a particular credit tradeline. Most veterans who served overseas during wartime either had very limited or no credit. Large percentage of veterans had poor credit. Objective of VA Loans was for the government to find creative ways to help our veterans be able to purchase a home after completion of their military duty.

VA Loan With Poor Credit Requirement

Veterans can qualify for VA Loan With Poor Credit, however, veterans need to prove that they have re-established their payment patterns and have been timely for the past 12 months. VA Loans is probably the best mortgage loan program available today but is only limited to veterans who have a certificate of eligibility. Borrowers can have prior poor credit and outstanding collections and charge off accounts and do not have to pay them to qualify for VA Loans. VA is not a lender but a government entity that insures private lenders that originate and fund VA Loans  in the event if the veteran borrower defaults on their VA insured mortgage loan. VA does have VA Residual Income Requirements  , VA does not have minimum credit score requirements or debt to income ratio requirements. Veteran borrowers can have an approve/eligible per Automated Underwriting System on a VA Loan with 580 credit scores and 60% debt to income ratio as long as they have sufficient disposable income which is also referred to as VA Residual Income Requirements . Credit score requirements and debt to income requirements on VA Loans is set by the individual lender.

Automated Underwriting System Approval On VA Loans

The Gustan Cho Team at Nationwide Mortgage only cares about an approve/eligible per AUS FINDINGS on VA Loans. Most lenders with have overlays on VA Loans. To get an AUS automated findings approval, the automated system wants to see the following:

  • 580 FICO Credit Scores
  • 24 months of consistent employment history and stable income
  • No late payments in past 12 months
  • No late payments after bankruptcy or foreclosure
  • AUS may request VOR if borrower is applying for VA Loan With Poor Credit Score
  • No Overlays as long as borrower can get AUS approval 
  • Two year waiting period after bankruptcy, foreclosure, short sale
  • Deferred student loans that is longer than 12 months are exempt from DTI Calculations
  • Veterans can qualify for VA Loan one year into Chapter 13 and no waiting period after discharge date of Chapter 13

VA Loan With Bad Credit

Late payments in the past 12 months will not automatically trigger a denial per AUS. VA Loans is one of the most relaxed and easiest loan programs available. Veterans can qualify for VA Loan With Poor Credit and Bad Credit but the Veterans Administration want to see that the veteran borrower has recovered and re-established themselves and like to see timely payments in past 12 months.

  • No down payment requirement on VA Loans
  • 100% Loan To Value on cash out VA refinance mortgages
  • No annual mortgage insurance premium on VA Loans
  • VA does require a one time funding fee which can be added on to the balance of the VA Loan
  • VA allows up to 4% in sellers concessions from sellers to contribute for borrower’s closing costs

Contact The Gustan Cho Team at Nationwide Mortgage and Realty LLC at 262-878-1965 or text Gustan at 262-716-8151 for faster response if you have questions on VA Loan with Poor Credit Score and high debt to income ratios.

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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