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3 Reasons You Won’t Qualify for a VA Loan (and How to Overcome Them)

October 21st, 2012

Reason 1: You’ve had a recent bankruptcy or foreclosure.

Solution: Wait it out and improve your habits.

A past bankruptcy or foreclosure won’t erase your chances of obtaining VA financing. But you will need to show a lender a steady period of good fiscal habits.

If you have a foreclosure or a Chapter 7 bankruptcy on your record, VA lenders will want you to wait two years before applying for a mortgage.

A Chapter 13 bankruptcy is treated a bit differently: If you’ve made your bankruptcy payments on time for at least 12 months, it is possible to obtain a VA loan.

Don’t forget that you’ll need to do more than “wait it out” in the post-foreclosure or bankruptcy period. You’ll also need to show a lender that you’ve changed your financial behavior for the better. Pay your bills on time, raise your credit score, maintain a steady income, and lower your debts.

Reason 2: Your employment isn’t considered stable and consistent.

Solution: Do your best to maintain steady employment.

We could write an entire article about the employment criteria for a VA loan. And we have (click here).

Employment stability is tough for an underwriter to assess. If you have two years of consistent, full-time employment, you’re probably going to sail through this portion of the evaluation.

But ex-military personnel facing a troubled economy often have a hard time meeting that two-year, full-time standard. If you’re a military buyer who doesn’t hit that benchmark, you’ll need to make a strong case for yourself:

We recognize that these tasks are easier said than done. But let’s be honest: If you want to keep your mortgage and your financial future in good shape, you’re going to need a consistent income. Otherwise, renting may be a better option.

Reason 3: Your credit score is too low.

Solution: Raise it.

Think about this: In August, 2012, the average qualifying credit score for a non-VA conventional purchase loan was 763.

VA lenders like Veterans United, on the other hand, only require a credit score of 620.

A score of 620 is drastically lower than what many conventional lenders require. But it’s not an easy target for all potential borrowers to meet. If you’re having trouble meeting that 620 benchmark, buckle down and review our five-step guide for improving your credit score. Here’s a summary of that five-step process:

Disclaimer : The views and opinions expressed in this blog are those of the author and do not necessarily reflect the official policy or position of the Houston Association of REALTORS®

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