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VA Loan Facts
VA LOAN CREDIT ISSUES
VA will analyze a borrower's past credit performance in determining the loan for approval.
A borrower who has made timely payments for the last 12 months serves as a guide and demonstrates
their willingness to repay future credit obligations. On the opposite side, a borrower who
reflects continuous slow payments, judgments and delinquent accounts is not a good candidate
for loan approval.
Below is a list of items concerning the borrower's credit.
LATE MORTGAGE PAYMENTS
In circumstances not involving bankruptcy, satisfactory credit is generally considered to
be reestablished after the veteran, or veteran and spouse, have made satisfactory payments for
12 months after the date of the last derogatory credit item(s).
When the underwriter analyzes the borrowers credit; it is the overall pattern of credit
behavior that must be reviewed, rather than isolated cases of slow payments. A period of
financial difficulty does not disqualify the borrower if a good payment pattern has been
maintained since then.
Account balances reduced to judgment by a court must either be paid in full or subject to a
repayment plan with a history of timely payments.
NO CREDIT HISTORY
In the area of credit, the lack of an established credit history should not be a deterrent to
loan approval. As provided in the credit standards, a satisfactory payment history on items
such as rent, utilities, phone bills, etc., may be used to establish a satisfactory
credit history.
CHAPTER 7 BANKRUPTCY
The VA guidelines state that a minimum of two years must elapse since the discharge date of
the borrower and / or spouse's Chapter 7 bankruptcy, not the filing date. A full explanation
of the bankruptcy will be required. The borrower must also have re-established good credit,
qualify financially and have good job stability.
CHAPTER 13 BANKRUPTCY
The VA guidelines state that they will consider a borrower still paying on a Chapter 13
Bankruptcy if the payments to the court have been satisfactorily made and verified for a
period of one year. In addition, the court trustee will need to give written approval to
proceed. A full explanation of the bankruptcy will be required. The borrower must also
have re-established good credit, qualify financially and have good job stability.
COLLECTIONS, JUDGEMENTS AND FEDERAL DEBTS
The VA guidelines state that if a collection is minor in nature, it usually does not need
to be paid off as a condition for loan approval. Judgments must be paid in full prior to
closing. A borrower is not eligible for the loan if they are delinquent on any federal debt.
This can include tax liens, student loans, etc. Payment arrangements that would bring the
borrower up to date may be considered for loan approval.
FORECLOSURE
A borrower whose previous residence or other real property was foreclosed on or given a
deed-in-lieu of foreclosure within the previous two years since the disposition date is
generally not eligible for a VA insured mortgage. If the foreclosure was on a VA loan,
the applicant may not have full entitlement available for the new loan.
CONSUMER CREDIT COUNSELING PLAN
If a veteran, or veteran and spouse, have prior adverse credit and are participating in a Consumer
Credit Counseling Plan, they may be determined to be a satisfactory credit risk if they
demonstrate 12 months' satisfactory payments and the counseling agency approves the
new credit.
FREQUENTLY ASKED QUESTION # 6 [ -more VA Loan questions- ]
- - - - - -
Q: I am a Veteran who purchased a home with my spouse utilizing my VA eligibility. I am now divorced and my spouse was awarded the home. How do I get my eligibility back?
A: When the property is awarded to the Veteran's spouse as a result of the divorce, entitlement cannot be restored unless the spouse refinances the property and / or pays off the VA loan in full or the ex-spouse is a veteran who substitutes their entitlement.
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VA Loan Rates
for 5/13/2008
30 year fixed
-----------------
0.000 points
6.000%
6.110% APR
15 year fixed
-----------------
0.000 points
6.000%
6.190% APR
Life Insurance for Military Members
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