Gustan Cho Associates
This BLOG On VA Loans With Under 620 Credit Scores Mortgage Guidelines Was UPDATED On January 2nd, 2019 By Gustan Cho of Gustan Cho Associates at Loan Cabin Inc. NMLS 1657322
Mortgage loans can be approved and funded in as little as 10 business days.
VA loans are hands-down the best choice for those who qualify and are seeking a loan program that requires as little cash as possible to close but still has very competitive rates.
Reserves and un-remarried surviving spouses of those who died while serving or as a result of a service-related injury. VA loans are also assumable. This means a buyer can assume an existing VA loan without having to apply for a brand new mortgage. Just like any other home loan however, the parties assuming the existing VA loan must still qualify based on income, employment and credit.
Reviewing a credit report used to be somewhat of a laborious process. The VA requires lenders to verify a responsible credit history. But that gives the lender quite a bit of latitude. A lender would request and receive a credit report and then line by line review each credit account. If there were occasional late payments showing up, a late payment is one that is listed as more than 30 days past the due date, the underwriter would typically request a letter of explanation from the borrower and proceed with the loan approval. Multiple late payments however would indicate a less than stellar credit history and unless the loan application had other redeeming factors the loan application would probably be declined.
Fast forward to today and most every aspect of a loan approval is done via electronic means, even credit.
Credit scores take a look at five different aspects of a borrower’s credit history, they are:
Each individual category contributes a certain percentage to the overall score.
When someone has used different types of credit responsibly, credit scores rise.
Because there are three credit bureaus there will be three scores.
It’s important to note here however that the VA does not itself require a minimum credit score.
Let’s say there is a couple buying a home and the lowest middle score is 600.
If this isn’t the instance, that the minimum score is 600, the lender can look at other positive factors within the file that could override a decision to turn down the loan.
If a lender can make the determination the borrower will make timely mortgage payments well into the future based upon other positive aspects of the file and not rely solely on the credit score, a loan can be approved and still be eligible for sale in the secondary markets. The lender will simply write a note in the file explaining why an exception for the credit score was made.
It’s important to note here that these are general VA guidelines. Our internal guidelines compare both the qualifying credit score with the debt to income ratio. Our review of compensating factors allows for an approval with a score as low as 580 and a debt ratio of 43. This means that monthly credit obligations, including the mortgage payment should not exceed 43% of gross monthly income. If the score is greater than 620, we can process and approve a VA loan application with a debt ratio up to 56.9%
The Author Gustan Cho of Gustan Cho Associates at Loan Cabin Inc. is the national managing director of Loan Cabin. Michael Gracz of Gustan Cho Associates at Loan Cabin Inc. is the Editor-In-Chief of Loan Consultants. He is a senior loan officer at Gustan Cho Associates, a division of Loan Cabin Inc. NMLS 1657322. Mike Gracz is also the Co Editor-In-Chief of The Gustan Cho Mortgage & Real Estate Resource Center at www.gustancho.com . He is licensed as a mortgage loan originator in numerous states throughout the United States. Contact Michael Gracz of Gustan Cho Associates Mortgage Group for your Real Estate and Mortgage Questions. Loan Cabin Inc. is a direct lender with no lender overlays on Government and Conventional Loans. Mr. Gracz can be reached 7 days a week at 63-659-7644 or text us for faster response. Or email Mike Gracz at email@example.com.
This BLOG On VA Loans With Under 620 Credit Scores Was UPDATED On January 2nd, 2019
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