Think You Can’t Qualify for a VA Loan? Think Again

It’s time to bust a few myths about qualifying for a VA loan. There are plenty of misconceptions about qualifying for a VA home mortgage loan, but we’ve included three of the most common reasons people think they won’t qualify for a VA loan—along with the reasons they may be wrong!

Myth 1: I can’t afford it.

Current VA interest rates are still among the lowest in half a century. In terms of value and affordability, these days are hard to beat! And VA mortgage loans are among the very best values in the home loan marketplace.

Next of all, a veterans mortgage loan does not require a down payment and, because the government guarantees the loan, you are not required to have home mortgage insurance either.  No insurance required and no down payment represent significant reductions to you as you factor in the amount of money you need to get into a home.

The last part of affordability is to plan. You won’t get far without a plan. You will find that setting up a strategy to pay off debt, and putting into motion another strategy to save a little bit of money each paycheck—no matter how modest—will pay huge dividends when it comes to improving your financial situation. Having a plan, and sticking to it, will give you the ability to make progress toward your goal of home ownership.

Myth 2: My FICO score isn’t high enough to qualify.

First of all, let’s get this right: the VA has NO min FICO score requirement, so don’t abandon hope if you have a low FICO score.  Each lender has their own overlays or underwriting restrictions that they place over the VA rules. One of the country’s most accomplished veterans mortgage loan companies works with  approved lenders that have NO minimum on VA streamlines and others  that go down to 580 score.

Here’s more good news. If you get a VA automated underwriting approval from FANNIE (DU or desktop underwriter) or FREDDIE (LP or loan prospector) some lenders will be OK regardless of your FICO since you have a guaranteeable loan.

If your FICO score is under 580, don’t despair.  Stay tuned because I’m about to show you some practical things you can do to improve that score immediately.

Myth 3: My financial past has doomed me.

Bad credit serves as a deterrent for lenders. That much is true. Whether it’s an old debt in collection or a bunch of maxed-out cards, mortgage brokers don’t look kindly on low FICO scores. After a rash of loose lending requirements, the mortgage lending industry now expects borrowers to show up with the best credit score possible.

With discipline, patience, and strategic fixes to your finances, most people can quickly bring their FICO score up to an acceptable level. Here’s how:

  1. Obtain your credit report and make corrections. If there are errors in dates, payment amounts or other information, file a dispute to correct the problem. Also make sure to dispute any old negative collections. Weston writes, “The older and smaller a collection account, the more likely the collection agency won’t bother to verify it when the credit bureau investigates your dispute.”
  2. Pay off credit card debt. Banks like to see a borrower with no more than 30 percent of her possible credit in use. Any more than that takes a toll on the FICO score. Increase your payments and work to pay off each card. MSN Money says, “While most debt gurus recommend paying off the highest-rate card first, a better strategy here is to pay down the cards that are closest to their limits.”
  3. Resist consolidating debt onto a single card. It’s usually best to leave older accounts open and have several accounts rather than one larger one. Plus, applying for a clean card to make a balance transfer can ding your FICO score.
  4. Be very cautious of debt consolidation or debt-relief plans that offer a quick fix. Even though many of these businesses promise to remove bankruptcies, foreclosures and judgments, they often do little to earn the hefty up-front fee they charge.  A slow, sure, steady approach is the responsible way to repair past financial mistakes.
  5. Verify that any default judgments are appropriate and legal. If there’s a judgment from a case that you don’t remember, it’s possible that the summons was purposefully served to an old address to elicit a default judgment against you. Go to the presiding court and file a motion to vacate. This takes a small payment and may require a new court date, but it could potentially knock a credit score-killing judgment from your record.

Don’t allow the past to ruin the future. Take advantage of the present to improve your financial health and open the door to that new VA financed home.

Get Started With Your VA Loan Today

7 Steps to Improving Your Finances

Getting into your own home is one of the biggest financial events (and commitments) of your life. For the great majority of Americans, getting into a home requires planning, thought, and preparation.

Most of us need a financial partner to get into that home. So we look for a lender we can trust, someone with a proven track record, someone knowledgeable and professional that can attend to all the details so we don’t have to. 

Getting the right financial partner is key—and that is why I’m recommending to you veterans for your  VA home loan mortgage needs. Having the right partner is half the job; the other half is to get your financial house in order. The better kept your finances, the greater your options in working with a lender.

Here are seven things you can do to get your financial house in order.

First:  Organize Your Spending

It’s really no fun to sit down and go over finances. But the willingness to perform and audit, to see where your money is going and then evaluate those choices, is the start of something big.  Pull your bank statements and/or credit card statements for the last twelve months, get out a pack of bright colored highlighters, and organize your spending into categories. Prioritize things! Be sure to pay yourself first with a direct deposit into savings and retirement accounts.

Second: See Yourself Bigger

One of your largest assets is your earning power. Almost everyone has certain skills or interests that come naturally. Believe in yourself a little more. Start small and convert that skill or interest into a revenue stream. Some of the most successful people begin modestly with something that they have a passion for.

Look for ways to add value to your work, and don’t be afraid to ask for a raise or bonus for your contributions. If you are not being paid what you are worth, then see what other opportunities may be available to you.

Third: There’s Gold in Them Thar Hills, uhm, Closets!

Ever play hide and seek? Sure you have. It’s time to play it again. But this time you are going to find stuff that is hiding right under your nose. Look for old cameras, furniture, clothing, knick-knacks: anything that you can list on Craigslist or EBay. Hundreds and sometimes thousands of dollars are hiding in the nooks and crannies throughout your house.

Also, pay your folks or the in-laws a visit. They may have saved a lot of that “old stuff” from your earlier years. Often these items are a gold mine you forgot you had. You can sell them and use that money for something that will bring you more enjoyment.

Fourth: Sharpen Your Investment Strategies

Your investments deserve a plan. A plan means you have made an intelligent decision about how much of your money should be in cash, equities, and bonds, and then within each of those categories which sub-class it should be in such as international equities, small cap, or emerging markets.

Managing your different accounts means that you rebalance them according to economic conditions so the right amount is in each category. If you have money in both pre-tax retirement accounts and after-tax brokerage accounts then it may make sense to put bonds in pre-tax accounts to make your portfolio is more tax efficient.

Fifth: Hire Professionals When Needed

Having certain things done for you is a solid strategy, especially when it means getting things done right.  You can read books about investing and hunt and peck all your life for a little extra scratch in the soil. Or, you can look around, ask around, and find a great financial partner that has a history of maximizing investments.

When you know it needs to be done, but you aren’t going to get it done yourself, hire the right people to do it for you. Before you hire someone to get your finances in order, decide what you need from them. Financial planning, investment advice, and retirement planning are separate services. Talk to people you trust, determine which type of services you need, and interview several people before picking one. Go slow and don’t get talked into anything. Don’t play Russian Roulette with your money.

Sixth: Swab the Decks, Matey!

A ship is in order when its decks are clean. With finances, you may not enjoy some of the seemingly thankless tasks that constitute housekeeping. But keep house! A little discipline goes a long way. If you eat out once less per week and bank it, a simple little choice results in hundreds extra per year.  See how much you can save. Then, if it makes sense to do so, snip off a portion of that as “mad money” and reward yourself with something modest but motivational that you really would not have expected to get under “business as usual.”

Seventh: Hit the Library

Hang up the video games, the online activities, the social media, or whatever else is stealing hours from your day. Give up something good to get something better. Apply yourself by reading, by learning something new. Find a way to apply it. Learning is a life-long process. You can increase your income and your savings by reading and committing to an ongoing process of learning. Choose a topic that will advance your career. Choose a subject that will advance or assist your fellow man. Give something back. You’ll feel a lot better about life and about yourself.

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*Annual savings calculator based on 2015 monthly average savings extrapolated year-to-date.