Having a low credit score does not mean you need to stop dreaming of your own home. It is because there is always a chance to improve your credit score. And if you are a veteran, military officer, or a surviving spouse, then you can get approval for a VA loan and satisfy your dream of homeownership.
Insured by the Department of Veteran Affairs, a VA loan does not have a minimum credit requirement. But as the lenders approve the loan, they ask for a credit score. And you need to meet that credit score for VA loan in Houston. Although a high credit score is preferred by lenders, you need a know a few things related to this score –
- Delay in Mortgage Payments
What causes late payment? Bankruptcy or something else? If not bankruptcy, then suitable credits can be reestablished after the veteran or the veteran and spouse have made satisfactory payments for 12 months. And it should be after the date of the last derogatory credit item. Account balances, which are reduced to judgment by a court must either be paid in full or subject to a repayment plan with a history of timely payment. There are no fixed policies. It can vary from lenders to lenders. So, you should ask about this in detail.
- Not having any credit history
Homebuyers who are about to apply for a VA loan, often don’t come with a credit history. Without having an established credit history, it would be difficult for you to get loan approval. Some VA lenders might be ready to work with you even with only one credit score. However, in such cases, you need to meet their in-house benchmark. If you don’t have a credit score, then you need to wait until a credit profile is built to secure 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.
- 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.
- 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’s 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.
These are the general things that affect your credit score for a VA loan. As you are now acquainted with these, without waiting any more start shopping for lenders to grab the best deal.