So let me run this one past you folks that have used a VA loan before.
I called and did a pre-qualification over the phone with VA with a loan officer from Veterans United Home Loans, and he sounded quite convinced he would be able to not only get me pre-qualified, but also pre-approved. So I send him the information he's requesting.....paystubs, w2s, etc, etc.
He calls me back and says the following:
"Well, you weren't approved through our automated underwriting system, mainly because your credit accounts are too new (oldest being from Jan of 13). That puts you into our manual underwriting process, and we'd have a problem getting a loan pre-qualified for you because you don't have enough reserves saved up. I think being able to have $2000-$2500 in your accounts will be helpful as well as just more time paying on your accounts you have that are relatively new. Also, the ability to get other credit references - with the strongest being the Verification of rent from your landlord and cancelled checks - will be most helpful. The only thing I think that keeps us from moving forward is really just having extra assets to show in your accounts. Work towards that and then let me know when you are there are if you can get gift funds from any family member that we can use and I will help you do that in the correct way and get your ready."
I never thought I'd be getting a loan, was just trying to find out where we were at and what we needed to do, but I thought the VA loan process so you had to have LITTLE TO NO MONEY to put onto a house? Had I known all of this was going to happen, I'd have waited a few more months.
What do you guys think?
The VA loan program is a zero down payment on the loan. There are some closing costs you can roll into the loan and depending on your state / local regulations and requirements there may be a few things that you may pay out of pocket. I know I had to make a cash deposit (earnest money) with the offer sheet that was applied against my loan. And I believe I paid for an inspection out of pocket but I don't know if that was required or suggested.
In any event the bank still wants to be sure that you can pay for the mortgage, so they want to see that you have some cash reserves after your normal living expenses in your accounts, and a credit history that shows that you are responsible. If your oldest account is really 01/13 then you haven't even established a history for reporting purposes much less enough history to allow a bank to evaluate you for a mortgage. If the 01/13 is a typo but you have less than 2 years of history then the LO is correct that continued good credit behavior will make the loan fly through easily.
I'm not saying that mortgage approval is impossible given what you said because someone will say "Well I know a guy who..." but it is highly improbable with an established bank or mortgage company. Maybe a high risk / hard money lender at an unfavorable (to you) rate - BUT...
You'd probably better served to work in the coming months to get at least 3 current tradlines on your credit report that are active (and in good standing) and are at least 12 months old. Once you're at that point, the VA automated underwriting system (which is used by all VA lenders nationwide...it's not exclusive to any one bank or broker) will likely at that time OK your file. This is provided your debt-to-income ratios are in line and that you have sufficent residual income for your family size.
Once you have the three active tradelines at least one year old, you likely won't have to worry about having to show any monies in reserves, although it's always a good idea to have at least a mortgage payment or two leftover after you close. Regardless: The lender still may want evidence you have paid your rent on time for at least a one-year time period.
Yes, the VA is a no money down loan but you're not allowed to finance any closing costs into your VA mortgage (except for the VA Finding Fee), so when it's time to place an offer on the house you like, consider asking for a seller's contribution and/or go with a slightly higher than market interest rate with the VA lender you choose. This will give you a lender rebate you can use towards your closing costs and will act to minimize the amount of money you need at closing. There should be no reason your lender/Realtor wouldn't be able to structure the transaction so that you can get closed on your mortgage for well under a grand total. Good Luck.
I just was pre-qualified over the phone with them and sent them a huge application packet back with my checkstubs,W2, etc ... The guy I spoke with sound confident too. I hope I don't run into this same problem. Wish I would have looked on this forum a couple of days ago. Oh well we shall see.
I thought the same exact thing when I started the process. I called the VA loan advertisements online and got those huge packets. I just never got the warm and fuzzy feeling about them. Now I am going to use a local mortgage company with my loan. dealing with them I felt I connected more and was able to actually get listened to. The guys on the phone was yep yep we can get and always positive comments. The local people were straight up about letters of explanation on my credit blemishes. I made an offer yesterday and it got accepted on a new construction home, so we will see which one is easier. Good luck and happy hunting!
I was pre-approved by VU today after mailing all the required paper work back. I have no blemishes on my credit. I hope the rest of the process goes smooth.