Are you in the military, an eligible veteran or a qualifying spouse of a service member, and want to buy a house? Then, you can obtain a VA loan. Guaranteed by the United States Department of Veterans Affairs (VA), VA loan does not require any down payment and minimum credit requirement.
But as VA does not offer it, lenders fund it; homebuyers need to abide by the guidelines set by the lenders. Generally, lenders have credit requirements that the homebuyers need to meet. Before you apply for the home loan programs, ask the lenders about the credit score for VA loan in Houston. But before that take a look at the things that can have an impact on a homebuyers’ credit profile and ability to get the loan.
- Late mortgage payments
In case, circumstances that involve bankruptcy are not there, satisfactory credit is generally considered to be re-established after the veteran, or the veteran and spouse, has made adequate payments for 1 year after the date of the last derogatory credit item(s). Some of the lenders may allow VA buyers to have one or more than 30-day late payments. But policies vary from a lender to lender.
- No credit history
Your credit history is important. So, if you don’t have a credit history, it will be an issue for lenders. Some lenders might be okay even if you have only one credit score, however, it would need to meet their in-house benchmarks. Homebuyers, who don’t have a credit score will need to spend time building a credit profile before you are able to secure a VA loan. Some lenders may consider non-traditional credit trade lines for homebuyers with a minimal credit history; however, these guidelines will vary by lender.
- Chapter 7 bankruptcy
According to the VA guidelines, at least two years must pass by after the discharge date of the borrower and/or spouse’s Chapter 7 bankruptcy, but not the filing date. A full explanation of the bankruptcy is also required. The borrower should also have good credit, qualify financially and have a stable income.
- Chapter 13 bankruptcy
The VA guidelines state that they will consider a borrower still paying on a Chapter 13 Bankruptcy only if the payments to the court have been made satisfactorily and verified for a period of one year. Moreover, the court trustee will need to give written approval to proceed. A full explanation of the bankruptcy will also be required. The borrower also needs to have good credit, can qualify financially and have good job stability.
- Collections and federal debts
Mortgage lenders may have a maximum allowable threshold for derogatory credit that can include collection debt. Those caps can also vary by lender, as well as other factors. Borrowers who have defaulted may need to be on a repayment plan with a history of on-time payments. Moreover, lenders might not move forward with a VA loan until you cleared from a federal debt database.
These are the general things that can affect your credit score and capability to get a VA loan. As you are now familiar with these, take steps to improve your credit score and then apply for a VA home loan program.
Author Bio: Joan Gallardo, a Senior Loan Officer, with 20+ years of experience, here writes on 2 questions to ask the best mortgage lender in Houston when you are about to choose one of the first time home buyer programs in Houston.