VA Credit Score Agency Guidelines Versus Lender Overlays

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This ARTICLE On VA Credit Score Agency Guidelines Versus Lender Overlays Was PUBLISHED On July 28th, 2020
Understanding VA Credit Score Agency Guidelines is very important for borrowers with less than perfect credit and eligible for VA loans.
  • VA loans are the best home loan program in the Nation
  • Due to the loan guarantee to lenders, mortgage companies can offer VA loans with 100% financing and no down payment required to eligible borrowers on VA loans
  • Again, due to the government guarantee, lenders can offer VA loans at competitive mortgage rates
  • VA mortgage rates are often lower than conventional rates
  • There are no pricing hits on loan to value on VA loans

The VA will insure and partially guarantee the loss due to a homeowner’s default on their VA loans if the loan goes into foreclosure.

VA Loans Are The Best Loan Program In The Nation With Lenient Agency Guidelines

Due to the government guarantee safety net, lenders are aggressively originating and closing VA loans:

  • The VA has no minimum credit score or maximum debt to income ratio caps
  • This holds true as long as the borrowers can get an approve/eligible per automated underwriting system
  • You can have prior bad credit and qualify for a VA loan
  • Borrowers can qualify for a VA mortgage after bankruptcy, foreclosure, deed in lieu of foreclosure, short sale
  • However, there are mandatory waiting periods after bankruptcy and/or a housing event to qualify which we will talk about later in this blog
  • The VA has lenient credit and income lending guidelines than any other mortgage program
  • Active and/or retired members of the U.S. Military normally have worse credit than their civilian counterparts
  • This is due to constant base transfers and deployment overseas
  • Due to this reason, it is easier to qualify for VA loans than any other home loan program

In this ARTICLE, we will discuss and cover VA Credit Score Agency Guidelines Versus Lender Overlays.

VA Credit Score Agency Guidelines: Why Do Lenders Have Different Minimum Credit Score Requirements

Many borrowers often get confused due to being told a minimum credit score requirement on VA loans by lenders.

  • Why is it that one lender may say the minimum credit score requirement is 620 while another lender says it is 640
  • Some lenders have 660 to 680 credit score requirements on VA loans
  • So What Is The Bottom Line? 
  • What is the Minimum Credit Score for a VA Loan?
  • Why do all these lenders have different credit score requirements?
  • Aren’t VA mortgages government loans?
  • Does each lender have different credit score requirements on VA loans?
  • The answer to all of the above is the following
  • All lenders need to abide by the minimum VA agency guidelines
  • However, each lender can have a higher credit score requirement and/or other lending guidelines that are above and beyond the VA minimum agency guidelines which are called lender overlays
  • This is why lenders have their own minimum VA credit score requirements
  • The VA does not have a minimum credit score requirement
  • However, most lenders have lender overlays

Gustan Cho Associates is one of the very few lenders that does not have any lender overlays on VA loans.

Understanding VA Credit Score Agency Guidelines Versus Lender Overlays On VA Loans

It is very important for borrowers to understand the VA Credit Score Agency Guidelines.

  • As long as the borrower qualifies for the minimum lending guidelines under the VA Agency Mortgage Guidelines, they will qualify for a VA loan
  • Therefore, if a lender says the borrower does not qualify but meets the minimum VA guidelines, the borrower may not qualify with that particular lender but can qualify for a VA loan with a lender like Gustan Cho Associates with no overlays on VA loans
  • Not all lenders have the same VA lending requirements
  • Just because one lender says you do not qualify does not mean you do not qualify with a different lender with no lender overlays

The bottom line is the VA has no minimum credit score requirements on VA loans.

VA Agency Mortgage Guidelines

In this paragraph, we will list the basic VA Agency Guidelines. If you meet the following mortgage guidelines, you will qualify for a VA mortgage with a lender like GCA Mortgage Group. Gustan Cho Associates has no lender overlays on VA loans. We just go off the minimum VA Agency Guidelines of the Veterans Administration.

Here are the agency guidelines:

  • 100% financing with no down payment required
  • Closing costs can be paid with a sellers concession and/or lender credit
  • There is a two year waiting period after Chapter 7 Bankruptcy, foreclosure, deed in lieu of foreclosure, short sale

Manual underwriting is allowed on VA and FHA loans.

VA Chapter 13 Bankruptcy Mortgage Guidelines

Borrowers in a current Chapter 13 Bankruptcy plan can qualify for a VA loan after making 12 timely payments to the bankruptcy trustee:

  • Chapter 13 Bankruptcy does not have to be discharged
  • If the Chapter 13 Bankruptcy is not discharged, the loan needs to be manually underwritten
  • Manual underwriting guidelines apply
  • There is no waiting period after Chapter 13 Bankruptcy discharged date to qualify for VA loans
  • However, any Chapter 13 Bankruptcy that has not been discharged for 24 months need to be manually underwritten
  • Again, manual underwriting guidelines apply
  • Outstanding collections and charged-off accounts do not have to be paid
  • The only co-borrower allowed on VA loans are spouses of the veteran borrower
  • Non-occupant co-borrowers are not allowed

Deferred student loans that have been deferred longer than 12 months are exempt from debt to income ratio calculations.

Qualifying For A VA Loan With A Lender With No Overlays

VA loans are for owner-occupant primary homes only. Borrowers can buy one unit to four-unit residentially zoned property with VA loans. Homebuyers can purchase a condo, townhome, single-family homes, and a two to four-unit multi-family home. To qualify for a VA loan with a national five-star mortgage company licensed in multiple states, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at gcho@gustancho.com. The team at GCA Mortgage Group is available 7 days a week, evenings, weekends, and holidays.

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