VA Loan Help Kindly Requested

[Anonymous]

Hello! This is my first post on this forum, so bear with me.

My husband is trying to utilize his VA loan, but so far it's proving difficult. We've had two different lenders run his information: a local lender and Veterans United. His middle score is a 629. He has very little debt to income ratio. Monthly gross income is $5500 (which includes his VA disability). The hold up seems to be 2 accounts in collections, one is $6900 and the other is under $600. Veterans United told him with his current scores, income, etc... if he can knock his collections under $5000 he's good to go. With our local lender, things are a little murkier. Our loan officer brought our case to their underwriter to specifically address the collections accounts to see if they would be a roadblock, and essentially she said that they very well could be. But here's the kicker! Our local lender also ran my husband's info for an FHA loan and he was pre-qualified with all current stats. Obviously, the FHA will require 3.5% down + PMI, so either way we're looking at $3000+ needed to move forward in either direction.

This brings me to my question... Aside from FHA, do these collections accounts pose a definitive roadblock in acquiring a VA loan? Is this a lender by lender thing or is it fairly common across the board? Any info you could give would be very greatly appreciated!

[CreditInspired]

Hi,

The first thing is to realize that a prequalification is totally different from a preapproval so take the prequal with a grain of salt.

I went on www dot FHA dot com and found the following statement:

Depending on circumstances, for “cumulative outstanding collection account balances of $2,000 or greater, the Mortgagee must...verify that the debt is paid in full at the time of or prior to settlement using acceptable sources of funds; verify that the Borrower has made payment arrangements with the creditor and include the monthly payment in the Borrower’s DTI.”

I think you're going to have a very difficult time obtaining any type of mortgage without some resolution to satisfying the debt if it is your's.

The site had some very informative information. Go to "Changes to FHA Loan Rules on Collections and Judgments."

[homeloanexpert]

The VA does not specifically require any open collections to be paid. It is at the decretion of the Underwriter. As for my company, I have funded hundreds of loans with outstanding or open collections. It would depend on what the debt is and how old it is as each state has a statute of limitations. I would be happy to take a look at your lender's credit report (if they provided you a copy) and give you a pretty good idea if we could do it. I am a Vet with 30 plus years in the biz.  Before you pay ANYTHING off I would recomend you PM me.

[VALoanMaster]

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@CreditInspired wrote:

Hi,

The first thing is to realize that a prequalification is totally different from a preapproval so take the prequal with a grain of salt.

I went on www dot FHA dot com and found the following statement:

Depending on circumstances, for “cumulative outstanding collection account balances of $2,000 or greater, the Mortgagee must...verify that the debt is paid in full at the time of or prior to settlement using acceptable sources of funds; verify that the Borrower has made payment arrangements with the creditor and include the monthly payment in the Borrower’s DTI.”

I think you're going to have a very difficult time obtaining any type of mortgage without some resolution to satisfying the debt if it is your's.

The site had some very informative information. Go to "Changes to FHA Loan Rules on Collections and Judgments."

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You missed a very important part of the FHA collection guidelines:

•      if a payment arrangement is not available, calculate the monthly payment using 5 percent of the outstanding balance of each collection and include the monthly payment in the Borrower’s DTI.

[me12345]

This is probably a company overlay or an Underwriters call.

We have done many VA loans with open collections, usually its not a problem

Please get a Second or Third opinion especially before paying anything off!

Thanks,