There are plenty of places to get information about mortgage loans. And yes, even though our mission is to educate eligible borrowers about VA loans, it still takes just a few clicks to get to a site telling you how to get a VA loan. What you may not find however, is how NOT to get a VA loan. What’s that? If you want to know how lenders decline a loan or really mess things up barely out of the starting gate, read on.
Employment Issues. Lenders need to verify at least a two year history of employment then make the determination that employment and the income that goes along with it will continue into the future. Affordability is validated when comparing monthly debt payments with gross monthly income. If you change employers, the lender has to stop the approval process and wait until you receive pay check stubs that cover 30 days. Lenders must use income you’re currently using, not the income you would receive from a future job.
Side Business Loss. It’s tax time and people across the country are filing their income taxes. For those with a side business, if the business incurs a loss for the year, that loss must be deducted from regular earnings. A side business that lost $5,000 last year due to expenses will reduce a $45,000 annual salary to $40,000. Sometimes a side business can hurt, not help, a borrower.
Remaining Entitlement Problems. For those wanting to use the VA home loan benefit for the second time around and buy another home, unless the previous VA loan has been retired there may be little to no entitlement remaining. Initial entitlement in today’s environment is $36,000 and the VA guarantee is 25 percent of the amount borrowed. If the borrowers keep the old VA loan and rent out the property or the note is assumed, there may be very little, if any entitlement left.
Credit Issues. One of the very first things a VA lender does after receiving an application is to pull a credit report. Most VA lenders ask for a minimum credit score of 620 although some VA lenders will approve an application using alternative methods. Know in advance what your credit looks like before applying.
Most any issue can be addressed before submitting any loan application. All consumers need to do is contact an experienced VA lender who can walk them through the process and detail ways to correct any potential problems.