VA Loan With Poor Credit Mortgage Approval

Gustan Cho Associates are mortgage brokers licensed in 48 states

One of the FAQs on VA loans is how I can get approved for a VA loan with poor credit. Finding a VA lender with no overlay is the key to qualifying for a VA loan with poor credit.  The answer is yes. You can get a VA loan with poor credit, with credit scores down to 500 FICO.  Veterans can qualify for VA loans with poor credit. The U.S. Veterans Administration has created and launched easier agency mortgage guidelines on VA loans than any other loan program. This was to promote homeownership for eligible active and retired U.S. military members with a certificate of eligibility (COE).

What Are VA Loans

YouTube player

VA loans are government-backed home mortgage loans. Lenders can offer 100% financing with no mortgage insurance at competitive rates due to the government guarantee on VA loans. VA loans have no maximum limit as of January 1, 2020.

There are no minimum credit score requirements with an approve/eligible per automated underwriting system (AUS).

The team at Gustan Cho Associates has helped countless borrowers qualify for a VA loan with credit scores down to a 500 FICO. Gustan Cho Associates has no lender overlays on credit scores on VA loans. This article will discuss and cover VA loans with poor credit and high DTI mortgage guidelines.

VA Loan Requirements on Debt-to-Income Ratios

VA loans have no maximum debt-to-income ratio caps with an approve/eligible per AUS. Borrowers with high DTI with residual income can often get an AUS Approval even with debt-to-income ratios higher than 65% DTI. Most lenders will have lender overlays on debt-to-income ratios as part of their lender overlays at 41% to 50% DTI, even though there are no maximum DTI caps. Most lenders will have minimum credit score requirements on VA loans at 620 to 680 FICO. This holds even though the VA has no minimum credit score requirements.

VA Guidelines Versus Versus Mortgage Overlays

Lender overlays are additional mortgage lending guidelines that individual lenders impose above and beyond the minimum VA Agency Guidelines. Gustan Cho Associates has no lender overlays on government and conventional loans.

A large percentage of our home mortgage applications are VA loans.  Gustan Cho Associates has zero lender overlays on VA loans.

We go off the automated underwriting system’s findings with no additional lender overlays. Since lender overlays are additional lending requirements imposed by lenders and NOT the Veterans Administration, not all lenders have the same guidelines on VA loans. Most veterans who served overseas during wartime had very limited or no credit. Data and statistics show more veterans with bad credit than their civilian counterparts.

Get Contact with Our loan officer for Va Loan after Bankruptcy

VA Loan Requirements After Bankruptcy

Veterans can qualify for VA loans after filing Chapter 7 Bankruptcy and after a housing event. Borrowers can qualify for VA loans after Chapter 7 Bankruptcy if they meet a two-year waiting period after the discharge 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 Loan Requirements After Foreclosure

The VA has lenient agency mortgage guidelines after a housing event. Most other loan programs require a three- to seven-year waiting period after a housing event.  The Veterans Administration requires a two-year waiting period after foreclosure, a deed-in-lieu of foreclosure, and a short sale, whereas the FHA requires three years.

VA Loan Guidelines During Chapter 13 Bankruptcy Repayment Plan

Borrowers can qualify for VA mortgages in a Chapter 13 Bankruptcy repayment plan after being in the repayment plan for at least one year. The VA requires borrowers to have made 12 timely payments to the Chapter 13 Trustee. Chapter 13 Bankruptcy does not need to be discharged. It needs to be a manual underwrite, and manual underwriting guidelines apply.

VA Loan Requirements After Chapter 13 Bankruptcy Discharge Date

There are no waiting period requirements after the Chapter 13 bankruptcy discharge date. If Chapter 13 bankruptcy has not been seasoned for at least two years after the discharge date, it must be manually underwritten. Gustan Cho Associates are experts in VA and FHA manual underwriting. The following paragraphs will discuss VA loans with low and bad credit scores.

VA Loan With Poor Credit Down To 500 FICO

VA does not require a credit score. Lenders, not VA, set the minimum credit score requirement. Most lenders will have a minimum credit score requirement on VA loans as part of their lender overlays. This holds true even though VA agency guidelines state no minimum credit score requirements exist. Lender overlays are mortgage lending guidelines above and beyond the minimum agency guidelines set by the VA. Gustan Cho Associates is a national mortgage company licensed in multiple states with no lender overlays on VA loans.

How To Get AUS Approval on a VA Loan With Poor Credit and Low FICO

Gustan Cho Associates go off the automated findings of the automated underwriting system (AUS) and do not have any other overlays on VA loans. We like to see veterans have credit scores of at least 580.  Veterans can still qualify for VA loans with a FICO under 580.

The only co-borrowers allowed with VA loans are spouses of veterans. Non-occupant co-borrowers are not allowed, like FHA loans.

VA loans are for primary owner-occupant homes only. Second homes and investment properties are not eligible. VA allows for deferred student loans that have been deferred for longer than 12 months to be exempt from debt-to-income ratio calculations.

VA Guidelines on Judgments and Tax Liens

Borrowers can qualify for VA loans with judgments and tax liens. This holds as long as they have written payment agreements with the judgment creditor. Consumers must have been paying on them for at least three months before the judgment creditor can qualify for a VA loan with IRS outstanding debts and an outstanding tax lien.

Borrowers will need a written payment agreement with the IRS. Borrowers must have been paying on the monthly agreed-upon repayment for at least 12 months.

The IRS must subordinate the tax lien in the second position so the lender can be in the first position. Your loan officer will help you do this, so there is no need to worry. The Internal Revenue Service also works with homeowners’ subordinate tax liens in the second position.

Documents Required To Process VA Loan

Borrowers need to provide mortgage docs, including:

History of Veterans Administration and VA Loans

In 1944, the VA Loan Program was created and launched to reward our veterans who had served in the U.S. Military and returned from active duty overseas after World War II. Most military personnel did not have the best credit or down payment to purchase a home after serving our country. So, the VA Guarantee was created. This allowed veterans to qualify for an affordable home purchase. The Department of Veteran Affairs ensured veterans qualified for VA loan with poor credit. Most veterans had poor credit since they served in the military during World War II.

Role and Mission of The U.S. Veterans Administration on VA Loans

The major purpose of creating VA loans was to give veterans a chance to become homeowners. VA loans are hands-down the best home mortgage loan program in the nation. This was accomplished with a preference for obtaining home loans with less than the credit required on other loan programs.

The mission of the Department of Veterans Affairs was 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 credit tradelines as part of their lender overlays. Some even require a two-year seasoning on how long the borrower needs to have a particular credit tradeline. This holds even though the VA does not require any credit tradeline requirements.

Why Military Has Lower Credit Profiles Versus Civilians

Due to data showing veterans do not have as much credit as civilians, the Veterans Administration has more lenient agency mortgage guidelines than other home mortgage programs. The 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.

Mortgage Requirements For VA Loan With Poor Credit Mortgage Approval

Veterans can qualify for VA loans with poor credit and low credit scores.  However, veterans need to prove that they have re-established their payment patterns. It needs to have been timely for the past 12 months. Borrowers can qualify for VA home loans with outstanding collections and charged-off accounts without having to pay them off.

Why VA Loans Is The Best Loan Program

VA loans are probably the best mortgage loan program available today. However, it is only limited to veterans with a certificate of eligibility. Borrowers can have poor credit and outstanding collections and charge-off accounts. They 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 if the veteran borrower defaults on their mortgage loan. The government agency does have VA Residual Income Requirements.

VA Credit Score and Debt-to-Income Ratio Guidelines on VA Loans

Veterans Affairs 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 lower scores and a 60% debt-to-income ratio. This holds as long as they have sufficient disposable income, referred to as Veterans Affairs Residual Income Requirements.  The individual lender sets credit score requirements and debt-to-income requirements on VA loans.

The Importance of The Automated Underwriting System Approval

Gustan Cho Associates only cares about an approve/eligible per AUS FINDINGS on VA loans. Most lenders have overlays on VA loans. To get an AUS automated findings approval, the automated system wants to see the following:

  • No minimum credit score requirements.
  • Twenty-four months of consistent employment history and stable income.
  • No late payments in the past 12 months.
  • No late payments after bankruptcy or foreclosure.
  • AUS may request VOR if the borrower is applying for a VA loan with poor credit score.
  • There are no overlays as long as the borrower can get AUS approval.
  • There is a two-year waiting period after bankruptcy, foreclosure, and a short sale.
  • Deferred student loans over 12 months are exempt from DTI calculations.

Veterans can qualify for a VA loan one year into Chapter 13 and have no waiting period after the discharge date of Chapter 13.

VA Loans For Bad Credit

Per AUS, late payments in the past 12 months will not automatically trigger a denial. VA loans are one of the simplest and easiest loan programs available. Veterans can qualify for VA loan with poor or bad credit.

The Veterans Administration wants to see that the veteran borrower has recovered and re-established themselves and likes to see timely payments in the past 12 months.

There is 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 to the balance of the VA loan. VA allows up to 4% in seller concessions from sellers to contribute to borrowers’ closing costs.

Qualifying for a VA Loan With Low Credit Scores and Bad Credit

The team at Gustan Cho Associates are experts in helping borrowers with VA loans with low credit scores and bad credit. VA loans are the best loan program in the Nation. Due to the government guarantee from the Veterans Administration, lenders can offer VA loans to eligible active-duty and retired members of the U.S. Armed Services with a certificate of eligibility (COE) with no down payment, 100% financing, and competitive mortgage rates. VA loans have no minimum credit score requirement or maximum debt-to-income ratio caps.

VA Loans Debt to Income Ratio Guidelines

Gustan Cho Associates has closed VA loans for borrowers with up to a 65% debt-to-income ratio with an approve/eligible per automated underwriting system. The VA has no maximum loan limit on VA loans. There is no mortgage insurance requirement on VA loans. Gustan Cho Associates is one of the few national mortgage companies with no lender overlays on VA loans. In this article, we will discuss and cover VA loans with low credit scores and bad-credit mortgage guidelines.

Qualifying For VA Loans With Low Credit Scores And Bad Credit

Gustan Cho Associates gets countless calls daily from borrowers whose lenders told them conflicting credit score requirements. Some borrowers were told the minimum credit score requirements were 660 FICO by one lender and 640 by another. Some borrowers are told they cannot qualify for VA loans without a 680 credit score.

Lenders are not telling loan applicants that the VA does not have a minimum credit score requirement. Many borrowers who meet the minimum VA Agency Mortgage Guidelines are shooed away by lenders with lender overlays.

These borrowers who may meet the minimum VA Agency Guidelines are told they do not qualify for VA loans. These borrowers may not qualify with the particular lender due to lender overlays if you are looking to qualify for a VA loan with poor credit with a national mortgage company licensed in multiple states with no lender overlays on government and conventional loans. In that case, Over 80% of our clients could not qualify at other mortgage companies.

Best Lenders For Bad Credit For VA Loans

Veterans told they do not qualify with this particular lender and may meet all VA Agency Guidelines. These borrowers qualify for a VA loan with a lender with no lender overlays on VA loans. Gustan Cho Associates is a mortgage company licensed in 48 states with no lender overlays on VA loans. We do not have any lender overlays on government and conventional loans. The next paragraph will discuss the minimum agency VA guidelines on VA loans.

All lenders will require their borrowers to meet the minimum VA Agency Guidelines. Lenders can have their own lending requirements that are above, and beyond the VA Agency, Guidelines called lender overlays.

It is legal for a lender to impose lender overlays on just about anything. For example, there is no minimum credit score requirement to qualify for a VA loan. Most lenders require a minimum credit score requirement, such as a 680, 660, 640, or 620 credit score. There are no debt-to-income ratio caps on VA loans.

Do Lenders Have Different Guidelines on VA Loans

Again, lenders can impose a maximum DTI cap on VA loans. This holds even though the VA does not have a maximum DTI requirement. Therefore, loan officers who get approve/eligible per automated underwriting system findings on a borrower need to manually double-check and qualify the borrower to see if the borrower meets the lender’s overlays. Gustan Cho Associates has no lender overlays on VA loans. Gustan Cho Associates is one of the few lenders with no lender overlays on VA loans.

Minimum VA Agency Guidelines

Below are the VA Agency Mortgage Guidelines. Borrowers who meet the following guidelines can get approved and close on a VA loan. If you meet the following guidelines and are told by a lender that you do not qualify for a VA loan, don’t hesitate to contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. Gustan Cho Associates is one of the few lenders with no lender overlays on VA loans. Only active and retired U.S. military members with a valid certificate of eligibility (COE) qualify for VA loans—or qualifying spouses of eligible veterans.

VA Loans After Bankruptcy Mortgage Requirements

There is a two-year waiting period after Chapter 7 Bankruptcy, foreclosure, deed-in-lieu of foreclosure, or short sale to qualify for VA loans. VA loans can be manually underwritten. Manual Guidelines Apply. Borrowers in an active Chapter 13 Bankruptcy repayment plan can qualify for a VA loan during the repayment plan without the Chapter 13 Bankruptcy being discharged with Trustee approval. However, it needs to be manually underwritten.

VA Loans After Chapter 13 Bankruptcy Discharged Date

There is no waiting period to qualify for a VA loan after the Chapter 13 Bankruptcy discharge date. Any Chapter 13 Bankruptcy discharge that has not been seasoned for at least two years needs to be manually underwritten. Manual underwritten guidelines apply.

Down Payment and Closing Costs Requirements on VA Loans

The VA allows 100% financing with no down payment required. Most borrowers do not have to worry about closing costs on VA loans. Closing costs are normally covered with a seller’s concession and lender credit. Outstanding collections and charged-off accounts do not have to be paid off to qualify for VA loans. Only spouses of eligible borrowers can become co-borrowers. VA loans do not allow for non-occupant co-borrowers, says John Strange:

Only spouses of the main borrower can become co-borrower on VA loans. Deferred student loans of 12 months or longer are exempt from debt-to-income ratio calculations. You will get approved for a VA loan if you meet the above minimum Agency Guidelines.

If a lender tells you that you don’t, but you meet the above guidelines, don’t hesitate to contact us at Gustan Cho Associates. The team at Gustan Cho Associates is available seven days a week, on evenings, weekends, and holidays. Contact Gustan Cho Associates at 800-900-8569 or text for a faster response with any questions on VA loans with poor credit scores and high debt-to-income ratios. Or email us at gcho@gustancho.com.


Similar Posts

Leave a Reply

Your email address will not be published. Required fields are marked *