   Purchase, Type 1 Cash-Out Refinance, and Interest Rate Reduction Refinance Loans (IRRRL)
|
|---|
These are general credit guidelines for VA loans. They do not represent the only requirements but
do provide a general overview
Credit Report
Credit Scores
In order to verify your credit history, your lender will obtain a credit report containing
information as reported by all 3 of the major credit bureaus: Trans Union, Equifax and Experian.
Most people will have 3 credit scores but it is possible that you may have only 1 or two scores if
you have limited credit history.
This report will also include information on any public records such as bankruptcies, judgments and
tax liens.
Though VA does not have a set minimum credit score requirements, lenders will have a minimum credit score requirement.
General Credit Score Requirements
Minimum Credit Score
620
In addition to the credit scores, your actual credit history is also analyzed. Collection account
may need to be paid off in order to close your loan
It is preferable that the most recent 12 months show satisfactory payments and no other derogatory
information.
If you experienced a major derogatory credit event, there will be waiting periods that will have to
be observed before you can be eligible to qualify for a loan.
Bankruptcy Chapter 7
2 years from discharge date
Bankruptcy Chapter 13
Immediately after discharge or
After 12 months of payments**
Foreclosure*
2 years from completion date
Short Sale*
2 years from completion date
* If the foreclosure or short sale was on a VA loan, you may not have full entitlement available
for the new loan
*** Must obtain written permission from the bankruptcy court/trustee and provide proof of
satisfactory payment history
Income and Employment
Minimum History of Employment
A minimum of 2 year history in the same industry/line of work is required in most instances but
it’s not a universal rule.
Recent graduates can satisfy the two year requirement by providing proof of schooling with a degree
for the line of work you are now employed in.
Active duty members do not need a two year history as long as the minimum service requirement for
eligibility has been met.
Self employed borrowers must always have a two year history of self employment and must show a two year history of filed tax returns to meet the 24 month requirement.
Retirement, Disability, alimony and child support income does not require a 2 year history but
verification that it will continue for at least 3 years is required in order for it to be included.
Income Calculations
If you are salaried, your base income will be used to qualify you for the loan.
However, if you are an hourly employee with varied hours, more than likely, your income will be
averaged
over an extended period such as 18 or 24 months depending on the situation.
Overtime, bonuses, commission and part time employment must have a 24 history in order to be
included in the qualifying income. The income will be averaged out over 24 months. Verification of
likelihood to continue will also be required.
Non taxable income can be grossed up to account for the non-taxable status.
ASSETS
No down payment does not mean no cash needed
As mentioned in the closing cost section, there are fees that will need to be paid as part of your
home
purchase or refinance.
You must have sufficient funds to cover any closing costs or fees not paid by the
seller or lender credit.
VA does not require additional cash to cover a certain number or mortgage payments or unplanned
expenses (cash reserves), however, your ability to accumulate liquid assets and the amount of
assets currently available is taken into consideration in the overall credit worthiness analysis.
Allowable source of funds
Funds for your down payment, closing costs and other expenses can come from:
• Checking/savings accounts
• Investment accounts
• Retirement account
Gift funds from a relative are an allowed source of funds to cover down payment and or closing
costs.
The gift will need to be verified and paper trailed via bank statements and a gift letter will need
to be signed
by your and the gift donor .
Funds from unsecured loans (signature loans, credit card advances) or funds that can not be
documented are not acceptable source of funds.
Federal regulations require that all deposits into your account be documented.
In the instance of payroll deposits, nothing will need to be done if the deposit shows as a Direct
Deposit from your employer.
All other deposits will need to be explained and documented.
Debt to Income Ratios
A debt to income ratios is the percentage of your total debt obligation, including the new
estimated mortgage payment, all debts shown on your credit report, as well as alimony, child
support etc, as compared to your gross qualifying income
Deferred student loans
If student loan repayments are scheduled to begin within 12 months of the date of loan closing, the
anticipated monthly payment will be included.
If you are able to provide evidence that the loan(s) will be deferred for a period outside that
time frame, the payment will not be included.
Alimony/child support You will be expected to truthfully declare that you pay alimony or child
support. You will be asked to provide your divorce decree and/or child support order to verify the
amounts.
Documentation Checklist
The following is a general list of documentation required for a home loan application.
Not all items will apply to your situation
CREDIT / IDENTIFICATION/ ELIGIBILITY
🏭 Copy of driver’s license or other photo I.D.
🏭 Copy of divorce decree
🏭 Copy of bankruptcy papers, including all schedules and discharge, and credit
explanation letter for reason for bankruptcy.
🏭 Letter of explanation on any late payments, collections, charge off’s or derogatory
credit
🏭 Letter of explanation for all recent credit inquiries
🏭 DD214 if not active duty or Statement of service if active duty
EMPLOYMENT/INCOME
🏭 Pay stubs (LES) for the most recent 30 days available
🏭 W-2's for the previous two years
🏭 Federal tax returns for the previous two years. All pages and schedules must be
included
🏭 If self-employed, provide all pages and schedules of last two years’ business tax
returns and corporate K-1's
🏭 Award letter for Social Security benefits, disability or Pension
🏭 Proof of receipt of child support, alimony or any other non-employment source of
income
ASSETS
🏭 Provide ALL pages of most recent 2 months’ statements for all accounts; including all
checking, savings, stocks, IRA, 401k, etc. The statements must show your name, account number and
the name of the banking institution. Any non-payroll deposits will have to be explained and
documented.
🏭 If funds to close will come from a gift, complete the gift letter (will be provided to
you) and the following:
🏭 From the donor - bank statements showing the funds in the donor's account and a copy
of the check from the donor's account
🏭 From you - a copy of the deposit slip showing the gift check deposited into your
account
🏭 If funds to close are from sale of home
🏭 Estimated closing statement showing anticipated proceeds
🏭 Copy of final closing statement and deposit slip showing proceeds deposited into bank
account
PROPERTY
🏭 Select your insurance agent and provide agent's name, address, and phone number
🏭 If refinance, or if you will be retaining your current home or own other property
🏭 Current mortgage statement
🏭 Copy of insurance declaration page
🏭 If you’re currently renting, provide your Landlord’s name, phone number and address.
🏭 12 months canceled rent checks will be necessary for private landlords. If you live
with a family member, letter stating you live rent-free will be required
