Even for those who have served their country, there are no guarantees when it comes to buying a home. When bad credit ratings are part of the equation, it can seem almost impossible to purchase the home we want. Luckily, however, it is easier to get the green light on a VA home loan with bad credit than from any normal mortgage provider.
This is good news, but there is no such thing as free money. Satisfying lender criteria is always necessary, but especially when seeking approval despite a low credit rating.
But as long as finances are in relatively good order and proof of service in the armed forces is provided, there is little trouble in qualifying for consideration. And then, once the boxes are ticked, the chances of securing the VA home loan is strong.
Key Qualifying Criteria
Like every other kind of loan, getting a VA home loan with bad credit comes down to satisfying the qualifying criteria that the lender lays down. When it comes to the VA, there are a number of criteria that extend beyond the normal income related conditions.
Obviously, an applicant needs to be either a current or a former member of the military. That includes, not only the armed forces, but also if time was served in the National Guard or even as a reservist. Getting approval despite a low credit rating is possible if there is proof of no late loan repayments or bankruptcy within a certain period.
Another condition is that the property to be bought with the VA home loan is to be a primary residence of the home buyer. So, someone seeking to buy a summer home or to buy property for renting purposes cannot qualify.
Income and Repayment
Of course, the basic condition for any loan is proof of a regular income. Although there are plenty of benefits available for anyone seeking a VA home loan with bad credit, it is just as important for an applicant to prove they are gainfully employed. This usually means providing confirmation with pay slips or a bank account history.
However, this is only half the requirement. It is also necessary to show an ability to meet the repayments each month, and this is a little tricker to do. The debt-to-income ratio is used to calculate this, with lenders not allowing the ratio to exceed 40:60. This means that, to get approval despite a low credit rating, it is necessary to show no more than 40% of the available income is taken up by debt repayments.
It is possible to qualify for a VA home loan if the existing obligations are low enough to ensure a healthy ratio exists. However, if the debt is too much, the application is set to be rejected.
Finding a Lender
It is important to note that, while getting a VA home loan with bad credit is a lot more likely than a normal mortgage, applications are not made to the VA itself. Instead, it is necessary to go to mortgage provider, who will then submit the application to the VA on your behalf. The idea is that much of the paperwork is then kept out of the hands of the VA.
In any case, the benefits to be enjoyed extend to a quarter of the amount borrowed being secured by the VA, thereby allowing the interest rate to be lowered and removing any need for a down payment. Of course, this makes it easier to get approval despite a low credit rating.
However, it is necessary to find a lender with good terms first, and convincing them to approve the application is the first stage to getting a VA home loan. So, choose the lender carefully.