VA Loan and Charge-Offs? Any Info?

[firemartinez1980]

Unfortunately I have 2 'charge-offs' for vehicles. 

One is from 2012 (Should drop off credit in December) and the other is from 2016.

My current score is around 585 and I have no other debt. I had a collection for $900 but just paid that off 2 weeks ago and it should be deleted from my credit by the end of the month. Monthly income is around $3800

I was wanting to apply for a VA Loan, but with a low score and those charge-offs, is that a deal breaker??

[JVille]

Do you have any other credit cards that show on time perfect payments for the last 2 months?

[homeloanexpert]

Hello my fellow Vet!

I deal with this every day. The VA does not require any charge offs be paid off. In fact the same applies for collections with the exception of any account that is government related i.e. Military Star etc. I tell all my borrowers who are worried about their low scores, that we go down to 550 on VA and down to 500 case by case, so at a 580+ you should be good to go. As a precautionary measure, I usually recommend that applicants open at least one fast reporting new account in order to boost their scores, depending on their time frame. But as long as you have maintained a good payment history in the most recent 12 month, you should be fine. Something to keep in mind. Although the VA does not have a minimum credit score, many lenders do. So before you apply, make sure you sure you know upfront what the lenders requirements are.

Hope this helps!

[firemartinez1980]

I opened a secured USAA credit card a year ago and use it and pay it off each month so it has perfect payment history and I was always current on all other old credit card payments. I understand the VA doesn't have minimum score requirements, but it seems like every lender wants a 620+. I applied about 3 years ago and was denied and at that time I had a score of 615.

[Anonymous]

To my knowledge as long as you can get your scores to the minimum guidelines and you’re eligible for the va loan you should be good. Now a specific bank may refuse you based on their own policies. I think in general you’ll be alright if you have the score requirement met. If you owed money to the same bank you’re trying to get a mortgage with you’ll probably have issues.

[homeloanexpert]

Hello,

I feel your frustration. I get several calls a week from Veterans who were turned down merely due to lower credit scores. I can assure not all lenders require a 620 credit score, as I stated above we accept lower scores, as well as several other lenders.

FYI, one main reason why some lender require higher score is, not every lender does manually underwritten loans, and generally speaking, 620 seems to be the threshold where you are most likely able to get an AUS (automated underwriting system) approval.

[VALoanMaster]

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@Anonymous wrote:
To my knowledge as long as you can get your scores to the minimum guidelines and you’re eligible for the va loan you should be good. Now a specific bank may refuse you based on their own policies. I think in general you’ll be alright if you have the score requirement met. If you owed money to the same bank you’re trying to get a mortgage with you’ll probably have issues.

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Hi FearedEffect,

This is not necessarily true. You may meet the minimum credit score requirement & still not be eligible based on things in your credit history.

For example:

I recently helped a Veteran get closed on a new home after he had been denied by another lender. Here's the deal, the Veteran had a 670+ score but they also had several 30 day late payments on a mortgage for a rental property in another state. I was able to get them approved based on an exception for extenuating circumstances. The other lender was not willing to make the same exception.

[VALoanMaster]

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@firemartinez1980 wrote:

Unfortunately I have 2 'charge-offs' for vehicles. 

One is from 2012 (Should drop off credit in December) and the other is from 2016.

My current score is around 585 and I have no other debt. I had a collection for $900 but just paid that off 2 weeks ago and it should be deleted from my credit by the end of the month. Monthly income is around $3800

I was wanting to apply for a VA Loan, but with a low score and those charge-offs, is that a deal breaker??

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Hi Firemartinez1980,

VA doesn't care about the charge offs but here are a couple of reasons you may want to address them any way.

1) If the accounts still report a balance, your scores may improve if you get them settled & they update to show paid/zero balance. The great thing with charge offs is you can generally settle them for pennies on the dollar.

2) By settling them now, you eliminate the possibility of the accounts being sold to a collection agency & having a new collection account hit your credit. This will obviously drop your scores but that's not the only issue.

VA now requires lenders to count any minimum payment reported on a collection account in your debt ratios. In most cases, the collection agencies report the balance owed as the minimum payment. I had to deny a Veteran last month because they had over $6,000 in collections & the collection agencies reported the minimum payment was the balance owed. That destroyed the debt to income ratios.

[Anonymous]

I live in Houston Tx and I am a disabled vet and I want to use my Tx veteran land board loan. But, credit score is below 600. Any lenders that you recommend?

[VALoanMaster]

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@Anonymous wrote:
I live in Houston Tx and I am a disabled vet and I want to use my Tx veteran land board loan. But, credit score is below 600. Any lenders that you recommend?

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Hi Makana0109,

I sent you a PM.