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This Article Is About Understanding The Guidelines Of VA Loans For Homebuyers

Understanding The Guidelines Of VA Loans is very important for homebuyers qualifying and shopping for VA mortgages. This holds especially true for first-time homebuyers or borrowers with less than perfect credit or lower credit scores. One of the most important factors about VA loans is that not all lenders have the same VA mortgage lending requirements. There are many lenders who advertise they are the number one lender of VA loans in the nation but yet require a 620 to 640 credit score. VA loans per VA agency guidelines do not have a minimum credit score requirement. Credit scores mandated by the lender are the lender’s own lending requirement that is above and beyond the VA agency mortgage guidelines. Gustan Cho Associates is a mortgage company licensed in multiple states with zero lender overlays on government and conventional loans. We do not require any other lender overlays on VA loans besides the minimum agency mortgage guidelines of the Veterans Administration.

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Understanding The Guidelines Of VA Loans: Agency Guidelines Versus Lender Overlays By Mortgage Companies

Lenders overlays are very common among mortgage companies. Many mortgage lenders feel the minimum agency mortgage guidelines are too risky for them. By risky, lenders feel the chance of borrower default is too much for them. Therefore, lenders will impose higher standards on credit, income, debt to income ratio, collections, charged-off accounts, late payments, manual underwriting, gift funds, and just about anything they feel is too much of a risk factor to them. Borrowers may meet all of the agency guidelines of VA loans but they may not meet the individual mortgage company’s standards. This is why understanding the guidelines of VA loans is very important for borrowers. If a lender says they do not qualify for a VA loan, borrowers will know they meet the agency VA guidelines and can qualify with a different lender. Over 75% of the borrowers at Gustan Cho Associates are folks who could not qualify for a VA loan with a lender. Gustan Cho Associates has a national reputation for its no lender overlays business model on VA, FHA, USDA, and Conventional loans.

How To Deal With A Loan Denial By A Lender

Over 75% of our borrowers at Gustan Cho Associates are folks who could not qualify at a mortgage company or got a last-minute loan denial due to lender overlays. There should be absolutely no reason why a borrower gets a loan denial after getting qualified and issued a pre-approval by a loan officer. Loan officers need to make sure the borrower is fully qualified and check their mortgage company’s lender overlay policy prior to issuing a pre-approval letter. Unfortunately, loan denials due to borrowers not being properly qualified still happen and will continue to happen. This is why loan officers who issue pre-approval letters without fully qualifying a borrower will be doing a disservice to their borrowers, real estate partners, and themselves. If a borrower with a full understanding of the minimum VA agency guidelines gets a loan denial, they will not stress too much because they will understand they can qualify for a VA loan with a different lender with no lender overlays.

Credit Score And Debt To Income Ratio Lender Overlays

It is very important for borrowers to understand there is no minimum credit score requirements or maximum debt to income ratio caps on VA loans. Gustan Cho Associates has no lender overlays on VA loans. What this means is we only go by VA agency mortgage guidelines and do not have any additional lending requirements outside of the minimum agency guidelines. Gustan Cho Associates has no lender overlays on VA loans. If a borrower gets an approve/eligible per automated underwriting system with a 500 FICO and 65% debt to income ratio, Gustan Cho Associates will process, underwrite, close, and fund the VA loan. VA loans do not have a maximum debt to income ratio cap, unlike other loan programs. We have gotten approve/eligible per automated underwriting system on borrowers with low credit scores and over 60% debt to income ratios. If a borrower has substantial residual income, they will get an automated underwriting system approval with high debt to income ratio.

The Importance Of Understanding The Guidelines Of VA Loans For First-Time Homebuyers

Understanding The Guidelines Of VA Loans is very important for first-time homebuyers and borrowers with lower credit scores. Many lenders who have lender overlays will not tell a borrower who did not qualify with their institution that they do qualify for a VA loan with another lender with no lender overlays. Oftentimes, the borrower is told they do not qualify for a VA loan with a 620 FICO and they often give up looking at a different lender. This is why understanding the guidelines of VA loans is important for first-time homebuyers and/or borrowers with less than perfect credit. Just because one lender says no does not mean you do not qualify with a different lender. In this article, we will discuss and cover understanding the guidelines of VA loans for homebuyers.

The Minimum Agency Lending Guidelines On VA Loans

Below is the list via bullet points on the VA agency guidelines on VA loans:

There is no minimum credit score requirement on VA loans with an approve/eligible per AUS and/or Manual Underwrite
There is no maximum debt to income ratio cap on VA loans with a manual underwrite
Only primary owner-occupant homes qualify
Second homes and/or investment homes do not qualify for a VA loan
No down payment required: Lenders offer 100% financing
No annual mortgage insurance premium
Funding fee can be rolled into the loan balance
Homebuyers can get up to a 4% seller concession by the home seller to be used for the buyer’s closing costs
Only married spouse of veteran borrower can be co-signer: Non-occupant co-borrowers not allowed on VA loans
One to four-unit residential owner-occupant properties
VA-approved condos allowed
No maximum loan limit
There is a two year waiting period after Chapter 7 Bankruptcy, foreclosure, short sale
Outstanding collections, charged-off accounts, timeshare foreclosures do not have to be paid to qualify
Borrowers in an active Chapter 13 Bankruptcy repayment plan can qualify for a VA loan one year into the plan with Trustee Approval and manual underwrite
There is no waiting period after the Chapter 13 Bankruptcy discharged date
If Chapter 13 Bankruptcy discharge has been seasoned for less than two years, it needs to be a manual underwrite

VA loans are the best home loan program in the nation. Mortgage rates on VA loans are generally lower than conventional loans. Only active or retired members or eligible spouses of deceased veterns of the United States Armed Services with a certificate of eligibility are eligible for VA loans. If you need to qualify for a VA loan with a lender with no lender overlays licensed in multiple states, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.