5 Factors Affecting Your Credit for a VA Loan in Houston

VA loan is a mortgage loan that offers financial aid to veterans, military officers, and their surviving spouses to realize their dream of having a home. Unlike other home loans, there is no minimum credit requirement set by the Department of Veterans Affairs, but the lenders who fund the loans will usually have credit requirements that a borrower has to meet.

Along with the credit score for VA loan in Houston, a lender considers past credit patterns to determine the willingness of the borrower to pay back the loan. So, you have to know the things that have an impact on your credit profile and the ability to get the loan. Here are the ones –

  • Late mortgage payments 

In circumstances that don’t involve bankruptcy, suitable credit is generally considered to be reestablished after the veteran or the veteran and spouse has made satisfactory payments for 12 months after the date of the last derogatory credit item. Account balances that are reduced to judgment by a court should either be paid in full or subject to a repayment plan with a history of timely payment. Policies can vary from lenders to lenders.

  • No credit history 

Lacking an established credit history is often an issue for lenders. Some lenders might be agreeing to work with you, even when you have only one credit score, however, it would need to meet their in-house benchmark. Homebuyers, who don’t have a credit score will often need to spend time building a credit profile before securing a VA loan. Some mortgage lenders may be ready to consider non-traditional credit trade lines for home buyers with a minimal credit history. However, these guidelines also vary.

  • Chapter 7 bankruptcy 

According to the VA guidelines, a minimum of two years should pass after the discharge date of the borrower and/or spouse’ Chapter 7 bankruptcy, but it is not the filing date. A complete explanation of the bankruptcy will be required. The home buyer should also qualify financially; have re-established good credit and stable income.

  • Chapter 13 bankruptcy 

To follow the VA guidelines, the lenders will consider a borrower still paying on a Chapter 13 bankruptcy in case the payments to the court have been satisfactorily made and verified for a period of one year. Moreover, the court trustee will need to give written approval in order to proceed. A full explanation of the bankruptcy will be needed. The borrower should also have re-established good credit, have good job stability, and qualify financially.

  • Collections and federal debts 

Mortgage lenders can also have a maximum allowable threshold for derogatory credit that can include collection debt. But it can vary by lenders and other factors. Borrowers who defaulted or who are delinquent on any federal debt may need to on a repayment plan with a history of on-time payments. Along with that, lenders might not move forward with a VA loan until you are cleared from the debt database known as CAIVRS. Talk to a lender in case you have defaulted or delinquent federal debt.

So now, what to wait for? Opt for a VA lender and apply for the loan today.

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.

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