12-16 months out VA loan prep

[Anonymous]

Thought I would post a few questions about the process. I've lurked a few months and read many of the VA threads.

Backstory:

We have finally decided to pursue a home after renting for years. Have several baddies as recently as a month ago so I know perfect payment history will be required for a year. Haven't done official pulls of the scores yet but Discover had my Experian FICO 8 at 680 and Transunion at 638. Have 2 credit cards now but only one reporting and will get one more in a month once both report.

On to the questions:

I have a current auto loan, but it will be paid off around the time we are buying (16) months from now. Will it hurt me if I dont have a current installment loan?

How far out should we search for a lender? and how wouldyou  recommend vetting one? It seems the quality of the LO is key in the process.

[ShanetheMortgageMan]

It won't hurt if you don't have a current installment loan with a balance.  The underwriter will be able to see past credit history on closed accounts and will consider it when approving your loan.  As long as the last 12 months of its payment history are clean the underwriter will count it as re-established credit.  I'd recommend you have at least 3 open revolving accounts.

Depending on the severity, the reason for, and amount of late payments, your credit may be passable with less than 12 months of clean credit.  How long of a period of time did the lates go on for?  What was the reason?

You can start talking with loan officers now, there is no reason to wait.  A lot of people become prepared by reading and asking questions here in the mortgage loan section.  Don't feel like you need to make a decision on which loan officer you'll go with right away.  Take your time to ask questions.  Make sure you aren't feeling pressured and get relatively prompt responses (remember they are also handling people's loans that are in progress).  Find out how long they've been doing mortgages, if they only offer their own companies loan programs or if they also broker loans out, and if they broker, how many lenders are they able to use (this is important if you feel like you'd have trouble qualifying, then if a loan denial occurs at one lender your loan officer will have a backup option so you don't have to re-start the process over again with someone new).  Your real estate agent can also suggest lenders they've successfully worked with.

[homeloanexpert]

Generally installment debts have less effect on a mortgage lender's credit report than revolving accounts. Keeping your credit card balances under 10% but never $0 is crucial. Not having an open installment debt is no biggie. Regarding your late payments, I would encourage you to not formally apply or have your credit run until  the recent late payments are seasoned out 12 months for the mere fact that your chances of getting approved for a $0 down VA loan are slim to none with really recent lates. Depending  on the circumstances I have been able to work around (1) late but more than that would be hard sell. You can start searching for a good experienced Loan Officer any time so you can work on improving your credit or strategizing in order to overcome any glitches that may try and derail you. A VA loan has some different nuances in comparison to an FHA or Conventional and if not guided down the right path, you could hit bump in the road or even a brick wall. So vet your LO well. BTW, thank you for your service my fellow Veteran!

Best wishes to you!

[Anonymous]

Thanks all,

Plan is to definitely wait a bit. The market here is very seasonal due to the local military presence. A lot of house churning April-May. So the plan is to grow the score with perfect payments and adding revolving credit. I went from 0 cards 2 months ago to 500CL with CapOne a month ago and now a 4500CL with discover last month. Once it reports and I see the score bump I'lll add NFCU hoping for an bigger SL and sit still while we pay all payments perfectly, keep UTIL very low, and let the installment loan pay off.

Nov-Dec next year we will start the application process. 

How would you reccommend vetting a LO? I am worried about feeling like I'm wasting thier time or being pressured to move early.

Thanks

[VALoanMaster]

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@Anonymous wrote:

Thought I would post a few questions about the process. I've lurked a few months and read many of the VA threads.

Backstory:

We have finally decided to pursue a home after renting for years. Have several baddies as recently as a month ago so I know perfect payment history will be required for a year. Haven't done official pulls of the scores yet but Discover had my Experian FICO 8 at 680 and Transunion at 638. Have 2 credit cards now but only one reporting and will get one more in a month once both report.

On to the questions:

I have a current auto loan, but it will be paid off around the time we are buying (16) months from now. Will it hurt me if I dont have a current installment loan?

How far out should we search for a lender? and how would you  recommend vetting one? It seems the quality of the LO is key in the process.

 Hi Stillguessing,

It's actually possible to get approved for a VA mortgage with derogatory credit hits in the last 12 months, it just depends on the lender & the reasons.

As far as the auto loan goes, it could hurt your scores once it closes but it won't necessarily affect you from an underwriting stand point. I recommend that you apply with a lender before the loan closes so you avoid the score hit.

Yes, the quality of the LO is the difference between a great experience & a terrible experience.

One way to vet your LO is right here. You can read through responses & get a pretty good feel for their expertise.

I would start right away for a couple of reasons.

1) You might qualify right now & if you can buy now, it's going to save you money because we are in a rising rate environment.

2) If you're not eligible right now, a good LO will work with you a plan to get you to the point where you do qualify.

Good Luck.

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[homeloanexpert]

Any seasoned LO understands it better to be out front on a deal than behind the 8-ball. The the more time you have to strategize with your LO, the better. As you stated in your original post, you told us your time line. You just need to tell your LO the same, that they know there is an end game to plan for.  I have had a borrower call me and tell they were as much as 2 years away. I never push anyone off. One day, that customer will hopefully come back to you. You can do a search in your area for an LO, you find one on this forum, or you can contact a Realtor and ask for a referral. Either way, make sure you check out their online reviews, License status on the NMLS Consumer website. If you do that, you should be good to go.