Guidelines of the VA Mortgage Process

VA mortgages often do not require a down payment of any sort from borrowers. These loans also typically provide lower rates of interest than those of more traditional loans. The process for applying is similar to that of other mortgage loans. The veteran’s certificate of eligibility and the appraisal assigned by the VA are really the only differing documents. Some lenders qualify for a process known as automatic processing, which is growing increasingly in popularity, and the loan can ultimately be administered and closed without the VA’s actual approval of the borrower’s application for credit. Moreover, if the lending institution is one approved by the VA’s Lender Appraisal Processing Program, that institution may review the completed VA-assigned home appraisal and process the borrower’s loan strictly based upon that review. This process can decrease the time necessary to wait for closing on the mortgage loan.

A borrower’s credit rating is assessed by the VA before approving a loan application. Timely payments as reflected over 12 months serve to indicate that person’s likelihood of paying future loan obligations. Conversely, an applicant who has visible untimely payments or delinquent accounts and judgments against his or her credit is likely a poor contender for approval of a loan.

Other factors are considered when reviewing a candidate’s credit rating. Some examples are provided below.

Untimely Mortgage Payments

Where bankruptcy is not a factor, satisfactory credit is usually identified when a veteran and his or her spouse (where applicable) have remitted timely payments of 12 months from the last date of the delinquent credit item(s). The borrower’s whole pattern of payments behaviors is assessed by an underwriter when reviewing a borrower’s credit. Isolated instances of slow payments are only one portion of the entire picture. Accordingly, a span of financial hardship does not eliminate the borrower from consideration for a VA mortgage, provided acceptable payment patterns have resumed and remained in place since that time. Account balances that reflect a court judgment either must have a repayment plan instituted with a chronicle of timely payments, or they must be fully satisfied.

No Credit History

A lack of established credit is not necessarily a prevention of loan acceptance. Solid history of payments as reported on telephone bills, utilities, and rent may be considered in order to institute satisfactory record of payments.

Chapter 7 Bankruptcy

Guidelines of the VA mortgage state that no fewer than two years must have lapsed between the Chapter 7 bankruptcy’s discharge date. The filing date is not used as the date of reference in this case. Moreover, an entire elucidation of the events that led to bankruptcy is necessary. Since that time, the borrower must have re-established his or her credit, maintained stable employment, and have the required financial obligations as imposed by the VA.

Chapter 13 Bankruptcy

Requirements of the VA are that a borrower who is still paying on his or her Chapter 13 Bankruptcy must have a verifiable history of one year in remitting timely and satisfactory court payments. In such a case, the VA will consider approving said borrower for a mortgage loan. Moreover, written approval permitting loan proceedings to continue must be received from the court trustee overseeing the bankruptcy. To this end, the borrower must have re-established his or her credit, stable employment, and meet financial qualifications as imposed by the VA.

Collections, Judgments, and Federal Debts

If the nature of the collection is relatively minimal, pay-off of the debt is not necessary for loan approval, as stipulated by VA mortgage guidelines. However, judgments must be fully satisfied prior to acceptance of the borrower’s loan application. Any federal debts that are delinquent will preclude a borrower from eligibility. This includes student loans, tax liens, and other imposed credit obligations. Arranging for payments that make the debt current again may approve the loan application.

Foreclosure

Borrowers who have experienced foreclosure on previous real estate properties within the last two years are generally precluded from a mortgage with the VA. This includes those applicants who received a deed-in-lieu of foreclosure. If said foreclosure pertained to a prior VA mortgage, the borrower might be without full entitlement as required for the loan at-hand.

Consumer Credit Counseling Plan

In the event that a veteran or his or her spouse (if applicable) have sought help from a credit counseling agency to reverse previous credit problems, they may still receive approval from the VA with regard to their loan application. This will only be illustrated if the applicant(s) have demonstrated timely payments over 12 months, and with sanction from the counseling agency thus approving the new loan.

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