VA Loan out of reach? Husband's credit issues

[ElleB]

Hi all,

This is my first post but I've lurked here a bit and learned a lot! I'm hoping you all can lend your input on my situation. We applied for a mortgage using his VA loan six months ago, and got denied due to my husbands credit (at the time lender's pull for him was TU 573, EX 534, EQ 590), mine are fine, median was 742. I recently got a promotion (I start next week) and my commute will be about 1 hr each way to my new office, so we are pretty eager to purchase a home even more than before.

We were planning to apply in the begining of July, but I saw a post on here about open disputes causing an auto decline. On 6/19 myFICO had his scores at: TU 666, EX 618, EQ 633; BUT... surprise, there were disputes! We take them off... And today through Experian "Plus"/fako scoring, he's showing as: TU 608, EX 542, EQ, 542. Sad Sad Sad!! I know these are not FICO, but it's still super discouraging. His credit report baddies are a 30 day late on his CC about 7 months ago (which was like $40 bucks, so irritating) good history before that, a medical collection on one report for $60 (seriously...), and his utilization. He has only one credit card with a low limit ($300), and he goes up and down on it. We've paid it down to under 15% but who knows when that will update. He also has several hard inquiries, and to be honest I don't even know where some of those are from neither does he. We have a joint car loan for about 17k good standing.

Our income is about 110k annually combined, we are looking for about 300k in the mortgage, single family home. We've had the same employer for the past 3 years. Monthly debt responsibilities are just the car, $348, and his child support, $1,000.00.

We have about 40k in our retirement accounts (401k), 5k in savings. We are looking to buy in south east San Diego County.

HELP?? Do we stand a fricking chance? Is there any point of applying again in July? The FAKO can be off I know, but i don't know if its realistic that they are off enough for us to get approved...

Input very much appreciated <3

[ShanetheMortgageMan]

VA doesn't have any guidelines regarding disputed accounts, however with a lot of disputes and a borderline file I've seen underwriter's use that as an excuse not to approve the loan.  If the disputed accounts are $0 balances then the underwriter isn't as tough on them.  As you can see, the reason underwriter's are hesistant about disputed derog accounts is because they aren't factored into the credit score/give a false score.

Reason why your husband's scores aren't better is because it sounds like he may not have a lot of re-established positive credit.  Doesn't matter how old the negative items are if there isn't much new positive credit.  You'll constantly be stuck with low scores until those negatives completely fall off credit.  Can you add him as an authorized user to your credit cards?  That may give him more credit history, as sometimes the past history will be added to his report.  The late payment 7 months ago and medical collection aren't helping him either.  You should look into http://www.whychat.5u.com/GUIDE%20HIPAA%20PROGRAM.html on how to deal with the medical collection.  Perhaps write a goodwill letter and see if that will take care of the late payment.  The credit inquiries could be old collection agencies.  If he didn't authorize them then he may be able to get them removed by contacting the credit bureaus and telling them they were not authorized credit checks.  Unless his credit is otherwise spotless, late payments or other delinquencies within the past 12 months usually are grounds for denial.

The debt ratio looks good, so it's just going to be a matter of gettig that 12 months of clean credit in my opinion.  Funny enough the scores can still qualify, as there are VA lenders out there going down to a 500 (we broker loans out to one of them), but the rates aren't great when scores are less than 620.  Are you looking to buy out in Boulevard?

[ElleB]

Thanks Shane!

I took your advice and added him as an authorized user to my CC, but it will be a while until it hits his credit reports. We are trying to get a good will revision of that 30 late with Capital One by phone and email... If there's no dice in the next couple days with the "fast" approach we'll go for snail mail and fax. The medical collection is only showing on Experian... so I'm hoping if the goodwill goes through he'll shoot up a bunch of points and get at least his median in a much better spot. Perhaps I'll have him try for a PFD with the medical?

Boulevard is a little too far south, we're looking around the Lakeside, El Cajon, Santee areas.

My new commute will be about an hour with my promotion until we get into a new place- I'm wondering if its worth a shot to go for the loan next month and see what we get or just suck up the drive and keep working on this credit (or wait out till the 12 month line on the baddie)?

[ShanetheMortgageMan]

Lenders can do full underwrite pre-approvals, so there'd be no harm in trying to get pre-approved but I'd say your chances wouldn't quite even be 50/50 with that late payment.  If you go for it, I'd wait until the AU account hits and the goodwill process works or or you are sick of waiting.  Worst case is you'd get no, and be told what needs to happen for you to get pre-approved.