Getting Approved For VA Loans For Bad Credit After Denial
In this article, we will discuss and cover the steps to take after getting denied by a lender for VA loans for bad credit. Not all lenders have the same VA lending requirements. Most lenders have overlays on VA loans. For example, the Veterans Administration does not have a minimum credit score requirement. It is not uncommon for a lender to require a 620 credit score or higher.
Over 30% of our borrowers at FHA Bad Credit Lenders dba of Gustan Cho Associates have credit scores under 600 and down to 500. The FHA Bad Credit Lenders team are experts in helping borrowers on VA loans with credit scores down to 500 FICO.
Many of our borrowers are veterans in an active Chapter 13 Bankruptcy repayment plan who need help getting approved for a VA loan via manual underwriting with low credit scores and high debt-to-income ratios. We can make the dream of home ownership a reality for our veterans. In the following sections of this guide, we will cover getting approved for VA loans for bad credit after being denied by other mortgage lenders.
About VA Loans for Active/Retired Members of the Military
Active duty and retired veterans with a valid COE can qualify for VA loans for bad credit and credit scores as low as 500 FICO. With higher home prices due to the housing boom, VA loans do not have a maximum loan limit.
A large percentage of our military veterans migrate to warmer climate states due to affordable cost of living, lower taxes, great job opportunities, and, more importantly, reasonable home prices.
Unlike Florida, Texas, Georgia, California, Arizona, Colorado, California, Michigan, Indiana, Kentucky, New Jersey, Pennsylvania, and Ohio, the values of many Southern and Midwestern states have not skyrocketed.
Eligibility Requirements For VA Loans For Bad Credit
Veteran homebuyers with a Certificate of Eligibility can now qualify for VA loans for bad credit. VA loans are hands down the easiest and best home loan program in this country. Many borrowers who contact me say their mortgage lender can approve them for FHA loans but not for a VA loan. Why is that?
There are many reasons other lenders cannot qualify them for VA loans for bad credit but can qualify them for FHA loans for bad credit. The United States Department of Veteran Affairs, or VA, does not have a minimum credit score or debt-to-income ratio requirements. Most lenders will have VA Lender Overlays that are higher than FHA Lender Overlays. Most Lenders will have a 640 Credit Score Requirement. Others may have a 620 score Requirement.
FHA Bad Credit Lenders has no overlays on VA loans. We do not have any credit score minimum requirements nor debt to income ratio cap. FHA Bad Credit Lenders has a national reputation for its ZERO VA LENDER OVERLAYS. Borrowers can qualify for VA loans for bad credit if they meet minimum VA Guidelines.
Not All Lenders Have the Same VA Loans For Bad Credit Guidelines
VA loans are much easier to qualify for than any other loan program. VA loans are the BEST mortgage loan program in the nation. HOWEVER, only Veterans of the United States Military with a COE, CERTIFICATE OF ELIGIBILITY, can qualify for VA loans. Because borrowers are Veterans of the United States Armed Forces with a COE, they still need to qualify and meet VA Guidelines.
How Does The VA Loan Guarantee Work?
VA loans are home loans that originate through private mortgage companies and banks. The United States Department of Veteran Affairs is VA. VA is not a lender but oversees the VA mortgage process. VA’s role is to ensure VA Loans are originated and funded by lenders who are VA approved.
The way the guarantee works is for any VA loans that are originated by Lenders that default and go into foreclosure, VA will guarantee and insure the lender that has originated and funded the loan against losses.
The VA Loan Guarantee by the Department of Veterans Affairs allows private lenders to keep on originating VA loans with no money down and very low mortgage interest rates due to little risk due to the guarantee by VA.
How Do I Qualify For VA Loans for Bad Credit
VA loans are the easiest mortgage loan program to qualify for, and qualifying for VA loans for bad credit is one of the specialties of FHA Bad Credit Lenders. The United States Department of Veterans Affairs is aware. It fully considers that Veterans often can have bad credit and low credit scores due to being deployed while serving in the United States Armed Services.
There are countless factors where Veterans can have lower credit scores and bad credit. Due to these circumstances, VA understands when Veterans apply for a home loan. They created very lenient credit and income guidelines when Veterans applying for VA loans for bad credit.
VA loans are the best mortgage program. It has very easy borrower qualification requirements. VA loans offer one of the lowest mortgage interest rates out of any mortgage loan program. VA eligibility guidelines on VA loans for bad credit. VA loans do not require any down payment. 100% down payment on VA loans. Not everyone can qualify for VA loans.
Who Can Qualify For VA Home Loans?
Only Veterans with a Certificate of Eligibility are eligible for VA loans. VA loans are for owner-occupant properties only. One to four-unit properties is eligible for VA loans.
FHA Bad Credit Lenders has no lender overlays on government and conventional loans. The only requirement is the borrower either get approve/eligible per AUS or meet the manual underwriting guidelines for VA loans.
As long as borrowers get approve/eligible per Automated Underwriting Approval, FHA Bad Credit Lenders will close on your VA loan. There are no debt-to-income ratio requirements on VA loans.
Comparing VA Versus FHA Credit Requirements
The United States of Veteran Affairs realizes that most veterans have lower credit and bad credit than the civilian public. Our government believes that most veterans have not had credit established as the civilian public. This is because of their constant transfers and deployment while serving in the Armed Service. Due to this reason, they either have no credit, little credit, or bad credit; thus, many veterans have little to no credit tradelines.
Most Veterans of the Armed Services do not take on student loans. This is because, if they do, the military pays for the student loans such as the ROTC college programs, and those who are enrolled at any one of the United States Military, Naval, or Air Force Academies have government-paid tuition and board. Most Veterans do not have established credit. This is because most Veterans do not have automobile loans or other credit.
When a Veteran is deployed overseas, the Veteran often has difficulty making timely payments on his or her debt back home. If the Veteran is deployed overseas and during wartime, missing a few months in payments on his or her bills can easily plummet the Veteran’s credit score. The United States Department of Veteran Affairs understands this, which is why qualifying for VA Loans for bad credit is easy.
What Lender Is Best For VA Loans For Bad Credit
Many Veterans will have less than perfect credit after retiring from the military, and the VA fully understands that. The U.S. VA Guaranty program already accounted for the fact that it is very probable for veterans to have lower credit scores or bad credit.
VA also has much more lenient credit guidelines than FHA loans. It is very important for borrowers to understand the minimum VA loan requirements and guidelines.
Suppose the borrower gets denied a VA loan from one lender and meets the agency guidelines of the Veterans Administration. In that case, they can qualify for a VA loan with a lender with no lender overlays.
Comparison of VA Versus FHA Credit Guidelines
Here Are VA Credit Guidelines Versus FHA Credit Guidelines:
- The waiting period is two years after a Chapter 7 Bankruptcy discharge date to qualify for a VA loan
- It is the same waiting period to qualify for an FHA loan
- The waiting period to qualify for a VA loan after a short sale, foreclosure, or deed in lieu of foreclosure is two years
- For FHA, the waiting period is three years to qualify for an FHA loan after a short sale, foreclosure, or deed in lieu of foreclosure.
- Students Loans that have been deferred for 12 or more months are exempt from debt-to-income calculations with VA loans.
- HUD does not exempt deferred student loans from debt-to-income ratio calculations
As you can see, VA credit guidelines are much more lenient than HUD Guidelines.
Why Am I Told I Do Not Qualify For VA Loan With Bad Credit But Qualify For FHA Loans?
There is not a day that goes by that I do not get a call from a Veteran who is told that they do not qualify for a VA loan unless they have at least a 620 or 640 credit score. Or that they do not qualify for a VA loan because their debt-to-income ratios are higher than 41% DTI.
Lenders tell our heroes misinformation and blatantly lie to them. These Veteran home buyers may not qualify for a VA loan with them, BUT they do qualify for a VA loan with a lender with no overlays. VA does not have a debt-to-income ratio requirement. There is no credit score requirement. FHA Bad Credit Lenders has a national reputation for not having any lender overlays on VA loans. We have helped thousands of veterans and their families qualify for VA loans with credit scores down to 500 FICO and debt-to-income ratio surpassing 60% DTI.
If you are told that you do not qualify for a VA loan due to not having credit scores over 620, don’t hesitate to contact us at FHA Bad Credit Lenders at 800-900-8569 or email us at gcho@gustancho.com. Text us for a faster response. FHA Bad Credit Lenders team is available seven days a week, on evenings, weekends, and holidays. FHA Bad Credit Lenders is known for being able to do loans other lenders cannot. Over 80% of our borrowers could not qualify at other mortgage companies.
Why Choose FHA Bad Credit Lenders For Being Your VA Lender?
Here are the latest reviews of what people are saying about us:
The best place to get a mortgage. They are VA-approved lenders with no overlays. You can have a 500 FICO score and still get FHA loan. They specialize in USDA loans, IHDA loans, downpayment Assistance, and VA loans. Over 75% of their business are people with bankruptcy, foreclosures, and collection accounts. They get you in a house when nobody will do. Most of the banks, Chase, Wells Fargo, Fifth 3rd bank requires 640+ FICO. If you’re are at 639 they will send you home and tell you that you do not qualify. Those guys at FHA Bad Credit Lenders don’t mess around and don’t waste your time. They are available 24/7 and always trying to help people who are first-time homebuyers, veterans, looking for mortgage down-payment assistance, or trying to find good mortgage rates! – Pete R.
Gustan Cho is responsive, informative, and fast! As a first-time homeowner, I appreciated the level of detail that was explained with each step, as well as the patience displayed in those explanations. On our first phone call, I think he spent over an hour personally explaining the home buying process and then went on to presenting options best suited for me and my specific situation and preferences. As well, he and his team are extremely responsive at all hours of the day. At the end of the day, I am closing on my house without any hiccups and I could not have been any happier with the transparency and quality of service provided by Gus and his team. – Maria. F
Awesome place to work. Great place to be. I wish I could give it 6 stars. – Matt H.
Not All VA Lenders Have The Same VA Loan Requirements
We will discuss changing lenders after getting denied on VA loans for bad credit and how to get approved and closed on your VA loan. Borrowers can qualify for VA loans for bad credit if they meet the minimum VA Agency Mortgage Guidelines. VA loans are the best home mortgage program in the nation. Lenders offer 100% financing on VA loans with no mortgage insurance required at lower than mortgage rates on a conventional loan. Only active and retired U.S. military members with a certificate of eligibility are eligible to qualify for VA loans.
The Certificate of Eligibility of VA Loans
The federal government looks out for its active and retired Armed Forces members. The government wants to do everything possible to reward our brave men and women in uniform for their ability to qualify for a home loan with no money out of their pocket and lenient credit guidelines. There are no minimum credit score requirements on VA loans as long as the borrower can get approve/eligible per AUS.
Debt-To-Income Ratio Cap on VA Loans
VA loans have no maximum debt-to-income ratio caps as long as the borrower can get AUS approval. FHA Bad Credit Lenders is a national mortgage company licensed in multiple states with no lender overlays on VA loans. FHA Bad Credit Lenders go off the automated findings of the AUS and have zero lender overlays on government and conventional loans.
No Maximum Loan Limit Caps on VA Loans
Borrowers members of the United States Armed Forces, including the National Guard, may qualify for VA loans. The VA allows eligible United States Armed Services veterans with a certificate of eligibility (COE) to qualify for VA loans with no money down and 100% financing. Veterans now qualify for VA loans with no money down and without a maximum loan limit cap.
Comparing VA versus FHA Guidelines
The VA has more lenient agency mortgage guidelines than any other home mortgage program. FHA loans, the maximum loan amount is $472,030. This holds unless the subject property is located in a high-cost area like many counties in California. California has the largest population out of any state in the United States.
Loan-Level Pricing Adjustments on High-Balance VA Loans
There are no changes in qualifying for standard VA loans versus high-balance VA loans except for pricing adjustments due to being higher than $647,200. High-balance VA loans are also referred to as Jumbo VA loans. VA loans have no maximum loan limit cap. However, there are loan-level pricing adjustments (LLPA) on Jumbo VA loans. This means higher rates on high-balance VA jumbo loans.
VA Loan Limits In High-Cost Areas
The average California housing price of $798,000 is double the national median home price of $547,500. Many counties of California are high-cost areas where the maximum FHA and Conventional loan limit is capped at $1,089,300 for 2023. California housing market forecast is home prices are expected to keep on going up due to the major housing shortage in all parts of California.
Why Is Housing So Expensive in California?
Not a day goes by without one of our viewers asking why housing is so expensive in California. To answer the question, we will ask Eric Jeanette, President, and CEO of FHA Lenders and Vice Chairman of NonPrime Lenders. Eric has hundreds of clients in California and is an expert in the California housing market. This is what Eric Jeanette has to say:
It is more expensive to build housing in California than other places in the country. There are strict building codes that developers have to abide by. Furthermore, there has been a push to make the building designs more environmentally friendly. That is also making it harder for developers.
The major reason why California’s home values are double the national median average price is due to California’s housing shortage. Due to the tough environmental regulations and red tape regarding construction and development, many homebuilders find it harder to make a decent profit in California than in other parts of the country. As of January 1st, 2020, VA loans no longer have a maximum loan limit. Qualifying for VA loans for bad credit with a mortgage company licensed in multiple states with no lender overlays.
FHA Versus VA Loans Mortgage Comparisons
Many veterans with a certificate of eligibility had difficulty getting VA loans for Bad Credit. They had to resort to FHA-insured loans instead, which require a 3.5% down payment. VA loans do not have a minimum credit score requirement nor a maximum debt-to-income ratio cap.
The team at FHA Bad Credit Lenders recently had a borrower get approved and closed on a VA loan with a 543 credit score manual underwriting with a 64% debt-to-income ratio. The borrower had strong compensating factors and strong residual income.
Veteran borrowers need to get approve/eligible per Automated Underwriting System Findings. Or they need to qualify and meet manual underwriting guidelines. Key in manual underwriting is borrowers need to have been timely on all their payments for the past 24 months on FHA loans.
Getting AUS Approval on VA versus FHA Loans For Bad Credit
VA loans were somewhat tougher to approve/eligible per DU or LP FINDINGS in recent years versus FHA loans with borrowers with outstanding collections and charge-offs. This is because of the no down payment requirement. However, VA loan programs have lightened up in recent months. HUD, the parent of FHA, does not require that open collections and charged-off accounts be paid off to qualify for FHA loans.
Late Payments in the Past 12 Months on FHA versus VA Loans For AUS Approval
If you cannot get approve/eligible per the automated underwriting system on VA loans due to late payments in the past 12 months, you may want to change to FHA.
HUD will approve you per AUS if you put a large down payment versus the 3.5% down. You may instruct your loan officer to try it with a 10% down payment and start increasing by 5% down payment increments until you get an approve/eligible per AUS on FHA loans.
VA loans will not render an AUS approval with late payments in the past 12 months. No matter how much down payment you put down on a VA loan, you will not get an approve/eligible per the automated underwriting system if you had late payments in the past 12 months.
VA Credit Guidelines on AUS versus Manual Underwriting
Fannie Mae and Freddie Mac Automated Underwriting System Findings are tougher on outstanding collections and charge-offs on VA versus FHA loans.
AUS often requires those open collections and charge-offs to be paid off for VA loan programs on the Automated Underwriting System Findings but not FHA loans. Those with many outstanding unpaid open collections needed to resort to FHA loan programs when they were denied VA loan programs via the automated underwriting system.
This is due to open collections or other derogatory credit. After they close with FHA loans, they can do a 100% cash-out refinance with a VA loan later.
VA Requirements and Guidelines on VA Loans
As long as borrowers are a veteran and have the certificate of eligibility paperwork, veteran borrowers can qualify for a VA loan with bad credit with no money down, 100% financing, and no mortgage insurance premium.
There is a funding fee for VA loans for bad credit. The VA Funding Fee of 2.15% of the loan amount is similar to the FHA upfront mortgage insurance premium.
The funding fee, normally 2% to 3%, can be rolled into the VA loan. Or the upfront VA Funding Fee can be paid with seller concessions and lender credit as part of closing costs.
No Down Payment Requirement With No Closing Costs on VA Loans
There are many scenarios where a Veteran can purchase a home with no money down. Seller concessions are allowed, which can cover all closing costs and pre-paid, which are property tax and insurance escrows.
If the homebuyer is short in covering closing costs with seller concessions, the lender can offer a lender credit in lieu of a higher rate to cover closing costs.
The United States Department of Veteran Affairs allows up to 4% seller concessions by sellers to cover veteran home buyers closing costs. Seller concessions can only be used for closing costs, not for home purchase’s down payments. Mortgage rates on VA loans are comparable to FHA loans.
Advantage of VA Loans Over Other Government Loan Programs
No money down and 100% financing is the best advantage of VA loans. FHA Bad Credit Lenders is a lender of VA loans with no lender overlays.
Another major advantage of VA over FHA loans is that there is no monthly mortgage insurance premium. VA loan mortgage rates are hands down lower than any conventional mortgage loan program.
No mortgage insurance premium is a major plus. There is no funding fee for disabled veterans. The funding fee is waived.
VA Loans With 500 Credit Scores
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We can now approve VA loans for veterans with credit scores as low as 500. Open collections and other derogatory credit are dealt with on a case-by-case basis. Manual underwriting of VA loans is now allowed.
Those Veterans who cannot get approve/eligible per DU FINDING and LP FINDINGS can now request manual underwriting on VA loans. Lenders do require timely payments for the past 12 months with AUS approval. It is not a deal-breaker for borrowers who are veterans with one or two late payments in the past 12 months. This only holds true as long as they get automated findings approval.
VA and FHA loans are the only two traditional mortgage loan programs that permit manual underwriting. Manual underwriting is the same as automated underwriting systems, but there is a lower cap on the debt-to-income ratio. However, with strong compensating factors, you can have a debt-to-income ratio over 60% on manual underwriting.
Qualify For VA Loans With Lender For Bad Credit
Veteran borrowers who cannot qualify by other VA lenders due to their lender overlays don’t hesitate to contact us at FHA Bad Credit Lenders. We are a national mortgage company with no overlays on VA loans.
Veteran Borrowers can qualify with us with under 620 credit scores. There are no minimum credit score requirements on VA loans.
Don’t hesitate to contact us at FHA Bad Credit Lenders at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. We are available seven days a week, evenings, weekends, and holidays. Most veteran home buyers looking to get qualified for VA loans for bad credit and low credit scores do not realize that the U.S. Department of Veteran Affairs (VA Home Loans) does not have a minimum credit score requirement.
Debt-To-Income Ratio Guidelines for VA Loans For Bad Credit
VA also does not have a maximum debt-to-income ratio cap. Veteran home buyers often ask what minimum credit scores are required because most lenders have their credit score requirements called lender overlays. Most lenders require 620 to 640 credit scores. They also have a maximum debt-to-income ratio requirement of 45% to 50%.
Research for the Best VA Lender For VA Loans For Bad Credit
FHA Bad Credit Lenders is a mortgage company with no overlays on VA loans. FHA Bad Credit Lenders does not have minimum credit score requirements on VA loans for bad credit. The FHA Bad Credit Lenders team does not have lender overlays and has no maximum debt-to-income ratio cap on VA loans. As long as veteran borrowers get approve/eligible per Automated Underwriting System findings, we go off the AUS.
Mortgage Guidelines on VA Loans For Bad Credit
VA home loans are hands down the best mortgage loan program in the United States. However, VA loans are only for veteran borrowers with a valid Certificate of Eligibility (COE).
Our government rewards the veterans of our military with VA loans in honor of their service to this country. The U.S. Department of Veterans Affairs realizes that our veterans may have less than perfect credit due to deployment.
Due to this reason, VA Guidelines are very lax and easier to qualify for than other loan programs. No down payment is required. 100% financing. There is an upfront VA Funding Fee, which can be rolled into the VA home loan balance.
What Does The Department of Veterans Affairs Do For VA Loans
One important fact veteran borrowers need to understand is that the U.S. Department of Veteran Affairs does not originate nor fund VA Mortgages. Private mortgage lenders originate, process, underwrite, fund, and service VA loans.
The function and role of the VA are to guarantee and insure VA loans that have been originated, underwritten, and funded by private VA-approved lenders. VA insures VA loans if veteran borrowers default on their VA loans.
VA will insure the lender the portion the lender lost due to the defaulted VA loan. VA mortgage rates are among the lowest out of all loan programs that foreclose. VA loans are the best mortgage loan program in the nation. However, not everyone is eligible for VA loans.
Mortgage Rates on VA Loans
Mortgage Rates on VA loans are based on borrowers’ credit scores. VA does not require annual mortgage insurance saves homeowners thousands of dollars every year. There are no minimum credit scores required on VA loans for bad credit. Credit Score requirements are up to the lender willing to originate and fund the VA loan. FHA Bad Credit Lenders does not have any credit score requirements.
VA Loans For Bad Credit New Lender Options After Getting Denied
FHA Bad Credit Lenders are mortgage brokers licensed in 48 states with dozens of investors without lender overlaps on VA loans. We have zero overlays on government and conventional loans. Over 80% of our borrowers are folks who could not qualify for VA Loans elsewhere due to those lenders having overlays on their VA loan programs.
What are overlays? Overlays are additional mortgage guidelines on VA Loans that are above and behind those mandated by the U.S. Department of Veteran Affairs. For example, VA does not require a minimum credit score requirement. VA does not require debt-to-income ratio requirements. As long as our borrowers can get approve/eligible per Automated Underwriting System Findings, We can guide our veteran borrowers to the road to a CTC and close on their VA loan.
Most lenders will require a 620 credit score. This is a credit score overlay on VA loans. Most lenders will require 43% to 50% debt-to-income ratios. VA does not have a debt-to-income ratio cap on VA loans. This lender is said to have lender overlays on debt-to-income ratios on VA loans. If one lender turns down a veteran home buyer does not mean they do not qualify with another lender.
How To Get Approve/Eligible Per Automated Underwriting System on VA Loans
As mentioned earlier, the Department of Veteran Affairs does not require credit scores or debt-to-income ratio requirements. However, borrowers do need to get approve/eligible per Automated Underwriting System unless the VA loan is a manual underwrite.
Veteran Borrowers can get automated approval on VA home loans’ bad credit. They do not have to pay off outstanding collections and charged-off accounts to qualify for VA home loans with bad credit.
The AUS frowns upon the fact that bad credit continues after a prior isolated incident of bad credit. It will be difficult to get an approve/eligible per automated underwriting system with late payments after bankruptcy and foreclosure.
How To Get an Automated Approval Via AUS With Bad Credit
Here are the key points to keep in mind to get an approve/eligible per AUS:
- A credit score of 580 or higher
- No late payments in the past 12 months
- Debt-to-income ratios under 50%
- Reserves
- No late payments after housing events and bankruptcy
- The Automated Underwriting System will favor a mortgage applicant with a 550 credit score with no late payments than a 640 borrower with multiple late payments
FHA Versus VA Loans For Bad Credit
VA has much more lenient credit requirements than other loan programs. For example, the waiting period to qualify for VA home loans after a housing event (after foreclosure, deed in lieu, short sale) when the waiting period is three years on FHA loans. FHA is much laxer regarding outstanding collections and charged-off accounts.
If veteran borrowers cannot get approve/eligible per AUS Findings to large amounts of collections and charged-off accounts, the loan officer can see if they can run AUS for an FHA AUS Approval. Veteran home buyers can get an FHA loan and refinance with a VA loan at a later date. It is next to impossible to get an approve/eligible per automated underwriting system (AUS) with late payments in the past 12 months not matter how much the down payment is. However, HUD, will get you an approve/eligible per AUS with late payments in the past 12 months if you put a 10% to 20% down payment on an FHA loan.
Homebuyers who need to qualify for VA loans for bad credit with a lender with no mortgage overlays, don’t hesitate to contact us at FHA Bad Credit Lenders dba of FHA Bad Credit Lenders at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. The FHA Bad Credit Lenders team is available seven days a week, evenings, weekends, and holidays.
