Home Buying in Elkins Park>Question Details

Denise, Home Buyer in Elkins Park, PA

what scores do yo need for VA loan and creditproblems do liens and judgements hurt?

Asked by Denise, Elkins Park, PA Sat Jun 25, 2011

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Anne M Rubin, CRS, GRI’s answer
Each situation is very individual but credit scores and judgements have an impact on all types of mortgages. You can easily find out what your situation is without any cost or obligation. Please contact me if you want to do further exploration.
0 votes Thank Flag Link Sat Jun 25, 2011
VA loans do not require a certain minimum score - you could even have no scores (as long as you have other forms of credit) and still be able to obtain a VA loan. However VA does not lend money directly, lenders lend money based on VA guidelines because VA is guaranteeing a portion of the loan that the lender makes. So lenders set the score requirement in the lending world. In the lending world you will see most lenders VA programs require anywhere from 600 to a 640 minimum credit score (that is your middle, or median credit score), however there are some that will go lower, to even 580 or even down to 500 (I am even aware of a few that will accept any score).

But score isn't everything, score is only half of your credit qualifying. The other half is what is on your credit, such as perhaps the judgments and tax liens you mentioned. What is on your credit is just as important as the scores, as if there are recent delinquent items or late payments even with a high credit score it could still mean you can't get qualified. It's a "What have you done for me lately?" type of approach - they want to see that "lately" (as in the last 12-24 months) that you 'have done your creditors right" by making all agreed payments within the time they were due. Certain situations that can be explained are OK, such as situations arising from extenuating circumstance (medical situation, death of a wage earner, etc.), but anything that was due to just plain old financial mismanagement (forgot to pay the bill, mail didn't arrive on time, etc.) usually needs to be 12 months out, and if there are repeat patterns, even up to 24 months.

Tax liens and judgments are severe, not as severe as a bankruptcy or foreclosure, but more severe than charge-offs & collections - the reason being is that judgments & tax liens can affect a lender's lien position on the home as judgments & tax liens can attach themselves to a title of a home.

For the most part judgments & tax liens need to be paid in full either prior to the mortgage application, prior to the closing on the loan, or at closing on the loan (each lender has different guidelines - be sure to disclose your info/ask questions about their guidelines upfront).... however if you are on a repayment plan, with all payments made on time (typically need to be on a payment plan for 12 months, just starting it yesterday isn't going to cut it), then there are lenders (including us) that will not require the debt to be paid off, but we will include the payment on the debt in your debt to income ratio (pretty logical I'm sure you'd agree).

That also goes for collections & charge-offs too (if anyone reading wanting to know). However collections & charge-offs aren't always required to be paid, it is up to the lender's guidelines and the underwriter's discretion (FHA & VA do not require payoff of collections & charge-offs for approval, so any required payoff of those is always a lender overlay/requirement).

Feel free to ask further questions.
0 votes Thank Flag Link Sat Jun 25, 2011
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