VA Mortgage pre-approval with Defaulted Student loan consolidation? CAIVRS...

[Anonymous]

This forum has a such a wealth of information. So grateful. My situation/questions:

Currently sit at Mortgage FICO EQ627/EX650/TU675. I have defaulted (35k$) student loans that the government was supposed to pay on my agreement with the military, but since closed the program and has left me in a scramble. That is not the issue I'm asking for help with. Time is of the essense. I'll be applying for a VA loan pre-approval shortly. 

My 627 and 650 CRA's still have my loans on the report until Feb 1 (6 days), when they will fall off and be clean. My plan has been to consolidate student loans through the Direct Loan Consolidation program, which will from what I know "soft pull" my credit and push to consolidate within about 45 days.

My question: Should I wait to consolidate until right after pre-approval? I know CAIVRS isn't checked on pre-approval and will be a sticking point if I were to throw in an offer and race to a 45 day escrow, BUT will the loan consolidation possibly hurt my score since all my student loans are technically off my report?

My thought is if the consolidation tanks my score I will be ineligible credit score wise to push forward and will not increase back into normal parameters until the loan has been picked up and others have been paid off. I'm not sure what or how those old accounts will show back up and effect score. 

The possible downside to waiting to consolidate until after the pre-approval (possibly mid escrow) is the credit pull at the finish line, now showing that I opened another 35$k line of credit for student loans. BTW, even with that monthly payment of the loan consolidation I will still be under 40% DTI.

Thanks for the help!

[VALoanMaster]

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wrote:

This forum has a such a wealth of information. So grateful. My situation/questions:

Currently sit at Mortgage FICO EQ627/EX650/TU675. I have defaulted (35k$) student loans that the government was supposed to pay on my agreement with the military, but since closed the program and has left me in a scramble. That is not the issue I'm asking for help with. Time is of the essense. I'll be applying for a VA loan pre-approval shortly. 

My 627 and 650 CRA's still have my loans on the report until Feb 1 (6 days), when they will fall off and be clean. My plan has been to consolidate student loans through the Direct Loan Consolidation program, which will from what I know "soft pull" my credit and push to consolidate within about 45 days.

My question: Should I wait to consolidate until right after pre-approval? I know CAIVRS isn't checked on pre-approval and will be a sticking point if I were to throw in an offer and race to a 45 day escrow, BUT will the loan consolidation possibly hurt my score since all my student loans are technically off my report?

My thought is if the consolidation tanks my score I will be ineligible credit score wise to push forward and will not increase back into normal parameters until the loan has been picked up and others have been paid off. I'm not sure what or how those old accounts will show back up and effect score. 

The possible downside to waiting to consolidate until after the pre-approval (possibly mid escrow) is the credit pull at the finish line, now showing that I opened another 35$k line of credit for student loans. BTW, even with that monthly payment of the loan consolidation I will still be under 40% DTI.

Thanks for the help!

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Hi Boxster,

Do the pre-approval first. Once we pull a credit report it's good for 90 days so you don't have to worry about whether or not the consolidated SL will affect your scores. 

The other side of this coin is the CAIVRS issue. I can close the loan with the CAIVRS open but you have to document that the loans are in repayment. If it's going to take 45 days to consolidate you'll want to start that process as soon as you get pre-approved.

[Anonymous]

VALoanMaster,

Thanks for the guidance. This might be an obvious no, but with 2 student loans still on my EX/EQ CR (about to fall off on Feb 1) but TU clear,  would it be possible to get pre-approved NOW? Or find a lender that typically pulls TU for pre-approval? My score is fine even without the drop off on Feb 1...

I know this is in the weeds, but im trying to make this swift. 

[VALoanMaster]

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wrote:

VALoanMaster,

Thanks for the guidance. This might be an obvious no, but with 2 student loans still on my EX/EQ CR (about to fall off on Feb 1) but TU clear,  would it be possible to get pre-approved NOW? Or find a lender that typically pulls TU for pre-approval? My score is fine even without the drop off on Feb 1...

I know this is in the weeds, but im trying to make this swift. 

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Mortgage lenders are going to pull all 3 bureaus for a VA mortgage. If I were to pre-approve you it would be contingent on the student loans being consolidated & back in repayment.

[Anonymous]

Thanks!

Update: The baddies fell off my report, got pre-approved! I put in an offer on the house yesterday... I consolidated my student loans today (usually takes about 40 days) to get sourced, paid, and cleared from CAIVRS. I'm at the point now where I can chose between at 45 and 60 day escrow, keeping the timeline in mind for CAIVRS. I'm essentially racing against CAIVRS. 

I have an appointment with the lender next week and will let her know about the CAIVRS $40k consolidated loan/$260 month that will be in the works behind the scenes, in order to clear the CAIVRS check that takes place 10 days prior to close date. 

My DTI will still be about 45%. Would she have the ability to change terms/interest rate while I'm in escrow because I have a new line of credit open for the loan consolidation (I had no loan repayment on my credit report or payment worksheet prior)? 

Any thoughts/ insight/recommendations would be greatly appreciated.

[VALoanMaster]

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wrote:

Thanks!

Update: The baddies fell off my report, got pre-approved! I put in an offer on the house yesterday... I consolidated my student loans today (usually takes about 40 days) to get sourced, paid, and cleared from CAIVRS. I'm at the point now where I can chose between at 45 and 60 day escrow, keeping the timeline in mind for CAIVRS. I'm essentially racing against CAIVRS. 

I have an appointment with the lender next week and will let her know about the CAIVRS $40k consolidated loan/$260 month that will be in the works behind the scenes, in order to clear the CAIVRS check that takes place 10 days prior to close date. 

My DTI will still be about 45%. Would she have the ability to change terms/interest rate while I'm in escrow because I have a new line of credit open for the loan consolidation (I had no loan repayment on my credit report or payment worksheet prior)? 

Any thoughts/ insight/recommendations would be greatly appreciated.

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Where did you hear that CAIVRS wouldn't be checked until 10 days prior to closing?

[Anonymous]

That I don't remember... not the case?

[VALoanMaster]

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wrote:
That I don't remember... not the case?

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No some lenders (like me) pull CAIVRS at pre-approval while others will wait until you go into underwriting & still others will pull as soon as your file is sent in to processing.

You need to be very careful here because an underwriter could look at the defaulted loan as a derogatory event & deny the loan regardless of the CAIVRS hit.

[Anonymous]

Ok. I have a 60 day close. Any recommendations?

Thanks!

[vlaw1084]

You are almost there. Almost the exact same track I took. let me know when close on your home. Use this as the driving force to obtain what you need for you and your familys future. Your DTI should still be good because student loans act a bit differently so you whould still have some breathing room. I believe at the time I had 20k consolodated but check with your Loan officer to double check the math.