Three Things Borrowers Should Do Before Applying For A VA Home Loan
The United States Department of Veterans Affairs (VA) does not issue home loans. However, the VA Home Loan program guarantees a portion of home loans to eligible military members and veterans. These loans are issued by traditional mortgage companies. If you default on the loan, VA will make it right and come after you for the amount you owe. This can mean garnishment of wages and tax returns, as well as a negative impact on your ability to obtain federal student financial aid. It can also negatively impact your ability to take advantage of other programs. As a result, you should make sure you are very ready to handle a mortgage loan before you even apply. The following three things are issues you should analyze before you decide to buy a home with a VA Home Loan.
Credit Score
VA does not mandate a minimum credit score requirement for a home loan. However, many lenders will not even look at your home loan application if your credit score is below 620. Check your credit score online to get a good estimate of your current score. Your bank or credit card issuer may offer a free credit score to you as part of your membership. Otherwise, you can use some of the reputable free credit score services online to obtain this information. Most of these services offer a credit score simulator to help you determine the best (and fastest) actions you can take to improve your credit score.
Credit Report
Most lenders want to see a clean credit report, free of major delinquencies and bad debts or accounts in collections. Check over your credit report. If any information was reported incorrectly, take the proper steps to dispute the entry or have the company at fault make a correction. If you have any past due accounts or accounts in collections, make those right and then negotiate with the creditor to clean up your credit report.
Income Requirements
Most lenders require that you have at least two years of solid, steady employment history under your belt before you apply for a mortgage. You should also make sure you have enough disposable income to be able to pay for your home. Include taxes and insurance into the estimated monthly payment. Most lenders won't extend a loan to you unless the monthly payment on your loan, including principal, interest, taxes and insurance is equal to or less than 28% of your gross income per month. If you are above this 28% mark, consider a house with a lower price tag, or find a way to increase your income.
For more information, contact Texas Veterans Home Loans or a similar company.
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