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VA Loan Requirements 2015
What are the VA Loan Requirements for 2015? These requirements guide a veteran borrower�s ability to repay the loan as well as the lender�s ability to lend. Whether buying a home or refinancing an existing home you must know the restrictions that will allow you to make better long-term financial decisions.
There are 3 key elements to any mortgage transaction.
- Credit – Your credit score history are the driving factor in today’s market.
- Debt to Income(DTI) – This ratio determines how much of a payment you can afford under the lending guidelines.
- Loan to Value(LTV) – This ratio determines how much you borrow against the value of the property.
VA Loan Requirements 2015
Credit Score and Established Trade Lines
Credit Score – Veterans Affairs (VA) insures VA loans and does not require a minimum FICO score. However, lenders have their own requirements that are in addition to those of the VA.
Most lenders today require the minimum mid-score in a tri-merge report to be at 620 or better. The credit report must clearly support an applicant�s ability to meet financial obligations in a timely, responsible manner.
Less than a handful of lenders will accept mid-scores down to 580 but you will need to have other compensating factors such as a larger down payment, a good amount of reserves, low DTI, and the loan will require Direct Underwriting (DU) approval or need to be manually underwritten.
Generally, lenders have been increasing their minimum FICO score mortgage requirement and some are now requiring a 640 mid-score as the cut off.
Most lenders have the following credit score guidelines:
- 620 up to $417,000 and 640 for IRRRL’s
- 720 for $417,000 to $650,000
- 740 for over $650,000
Established Trade Lines – VA loan requirements allow for both traditional and alternative credit trade lines. However, most lenders require that you must have at least two lines of credit that you have maintained for at least two years.
Alternative lines of credit are defined as continuing obligations, such as cell-phone / home-phone bills, utility bills, rent history, car insurance, which require a periodic payment in order to establish payment history. To be used to establish a minimum payment history, an alternative credit trade line must have existed for at least 12 months.
VA loan requirements do not consider absence of a credit history as an adverse factor. However, a minimum two year history of the applicant, including residence, income, assets and credit must be developed.
Late Payments, Collections, Bankruptcies, Liens, Judgments, Foreclosures, and Child Support
Late Payments – VA loan requirements does not allow for more than one debt payments being more than 30 days late if the incidents have occurred within the last 12 months. This includes more than one late payment on a single account. In addition, individual lenders may have restrictions on late payments made in the last 12 months.
Isolated collection accounts do not necessarily have to be paid off as a condition for loan approval. For example: a credit report may show numerous satisfactory accounts and one or two unpaid medical (or other) collections. In such instances, while it would be preferable to have collections paid, it would not necessarily be a requirement for loan approval.
Bankruptcies – Chapter 7 must be discharged for at least 2 years with no late payments since the date of discharge.
Applicants who filed for Chapter 13 and have satisfactorily completed their payments, can be considered as having reestablished satisfactory credit. If the applicant has satisfactorily made at least 12 months of payments and the Trustee or the Bankruptcy Judge approves of the new credit, the lender may give favorable consideration.
Liens – VA loan requirements will not allow for any delinquent federal debt such as student loans or tax liens or other government debt, no matter what their age as long as they are currently delinquent and/or due and payable.
Foreclosures – VA loan requirements state that an applicant may be eligible if there was no loss of security on a foreclosure or a satisfied judgment that was completed more than 12 months prior to the date of the application. However, if there was loss of security due to a foreclosure, the applicant is ineligible for a VA loan within 36 months after foreclosure.
Child Support – VA loan requirements states that child support that is in arrears must be brought current. If a payment schedule has been established with the Court for the past due amount and a history of satisfactory payments is provided, the applicant will not be required to pay the past due amount in full. Both the payment for the past due child support and the regular court ordered support payment will be included in the applicant�s income to total debt ratio.
If you are paying court ordered child support, it is considered a liability payment (even though it may not show up on your credit report or your pay stubs as wage garnishment) and counts against your debt ratio (DTI). Receiving court ordered child support is considered a source of income.