VA Derogatory Credit Mortgage Guidelines On VA Mortgages

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VA Derogatory Credit Mortgage Guidelines On VA Mortgages

This ARTICLE On VA Derogatory Credit Mortgage Guidelines On VA Mortgages Was PUBLISHED On November 8th, 2019

VA Derogatory Credit Mortgage Guidelines
Gustan Cho Associates

VA Derogatory Credit Mortgage Guidelines On VA Loans are very lenient.

  • VA mortgages have the most lenient lending guidelines than any other loan program
  • The Department of Veterans Affairs (the VA) is the government agency that governs VA Loans to eligible members of the U.S. Armed Services
  • The VA created very lenient mortgage requirements to promote homeownership to all eligible veterans with a Certificate of Eligibility
  • Many homebuyers think they need perfect credit and low debt to income ratios to qualify for VA mortgages
  • This is absolutely not the case

In this article, we will cover and discuss VA Derogatory Credit Mortgage Guidelines On VA Mortgages.

VA Agency Guidelines Versus Lender Overlays

What are VA Agency Guidelines Versus Lender Overlays

There are two types of lending guidelines mortgage companies adhere to when it comes to VA Loans.

  • All lenders need to meet VA Mortgage Guidelines on VA Home Loans
  • However, every mortgage company can have its own lender overlays that is above and beyond those of the minimum VA Agency Lending Guidelines
  • The additional lending requirements imposed by each individual lender is call lender overlays on VA Loans
  • A lender can set any lender overlay they want
  • It is perfectly legal
  • For example, there is no minimum credit score requirement on VA Loans by the VA

However, most lenders will require borrowers to have a 620 or higher credit score requirement. This holds true even though the VA does not require a minimum credit score requirement.

Minimum VA Agency Guidelines Versus Lender Overlays

What are Minimum VA Agency Guidelines Versus Lender Overlays

In this paragraph, we will cover the minimum VA Agency Guidelines versus typical lender overlays by lenders. Gustan Cho Associates is one of the very few national lenders with no lender overlays on VA Home Loans:

The VA does not have a minimum credit score requirement:

  • However, most lenders will require a 620 to 640 credit score as part of their lender overlays

The VA does not have a maximum debt to income ratio cap as long as borrowers can get an approve/eligible per automated underwriting system:

  • However, most lenders will cap debt to income ratios on VA Loans to 45% to 50% as part of their overlays

VA Derogatory Credit Mortgage Guidelines does not require outstanding collections and/or charged-off accounts to be paid:

  • Most lenders will require outstanding collections and charged-off accounts to be satisfied as part of their lender overlays

The VA does not mandate timely payments in the past 12 months as long as borrowers can get an approve/eligible per AUS:

  • Many lenders will require timely payments in the past 12 to 24 months even though the borrower gets an approve/eligible per AUS

The Veterans Administration does not require credit tradelines:

  • Many lenders will have overlays that require three credit tradelines for 12 to 24 months as part of their overlays

Manual Underwriting:

  • VA and FHA loans are the only two loan programs that allow manual underwriting
  • Many lenders will not entertain manual underwriting on VA and FHA Loans
  • A large percentage of our borrowers at Gustan Cho Associates are manual underwrites

The bottom line is not all VA lenders have the same requirements and guidelines on VA loans. Just because a borrower may not qualify with one lender does not mean they cannot qualify with a lender with no overlays like Gustan Cho Associates.

VA Derogatory Credit Mortgage Guidelines On Chapter 13 Bankruptcy

What are VA Derogatory Credit Mortgage Guidelines On Chapter 13 Bankruptcy

The VA does allow borrowers in Chapter 13 Bankruptcy repayment to qualify for VA mortgages.

  • Unfortunately, not all lenders will allow this due to their lender overlays
  • Borrowers can qualify for VA loans during Chapter 13 Bankruptcy repayment with Trustee approval
  • Most trustees will approve a home mortgage as long as the borrowers can afford the monthly housing payment
  • It will need to be a manual underwrite
  • Chapter 13 does not need to be discharged
  • There is no waiting period after Chapter 13 Bankruptcy discharged date

Any Chapter 13 discharge that has not been seasoned on the discharged date for less than 2 years needs to be manually underwritten.

Qualifying For VA Mortgages With A Direct Lender With No Overlays

How Qualifying For VA Mortgages With A Direct Lender With No Overlays

For more information about this article and/or to qualify for VA loans with derogatory credit tradelines, please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at gcho@gustancho.com. Our team at Gustan Cho Associates Mortgage Group is available 7 days a week, evenings, weekends, and holidays.

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