3 Myths About VA Loans And Bad Credit

3 Myths About VA Loans and Bad Credit

Accounting for only 2 percent of all mortgages for decades, VA loans now consume 10 percent of mortgage volume today. So, in this article let’s discuss the top 3 myths about VA loans and bad credit.

While the VA has made many changes in recent years to the VA home loan benefit program, sellers and borrowers still remain hesitant about home loans backed by the Department of Veterans Affairs.

Top Benefits of a VA Loan

Some may argue the so-called “ups” and “downs” of VA loans. But, As a Veteran or active military member looking to purchase a home, VA loans are of huge benefit so at HomePromise we want to clear up some myths. Fact is, this type of loan is almost always your best option.

There are many benefits in using your VA home loan benefit. Here are three to begin with:

There is no mortgage insurance.
You can purchase a home without having a down payment.
The VA does not require any specific credit score.

“I would definitely recommend HomePromise to anyone who is looking to mortgage or refinance!” – Eulis B.

How to Get a VA Loan With a Challenging Credit History

A VA loan is a specialized type of government loan, backed by the Department of Veterans Affairs (VA). It allows you to qualify for a low-cost mortgage when you’re looking to purchase or refinance a house even if your credit isn’t perfect. If you’re on active duty in the military, a military surviving spouse, or are a veteran, you’re potentially eligible for a VA loan.

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The main downside to VA loans is not truly based on fact. It’s more of a myth. That is some sellers believe the closing process on a VA loan will take much longer than on a conventional loan. This just is not the case.

As for other myths about VA loans and bad credit, we will discuss the top 3 myths causing hesitation among some people. We will share the facts in an effort to debunk these myths.

Myth 1.

Certificate of Eligibility Takes Forever

As a veteran, you must meet the basic eligibility requirements in order to become a VA borrower. The most basic requirement for a VA loan is either serving 90 consecutive days during wartime or a minimum of 181 days active duty during peacetime. National Guard or Reserves members must have served at least six years to qualify. Also note that National Guard and Reserve service can’t be inactive.

The myth about this process taking forever is drawn upon past years when the verification process required the mailing of a letter to the VA. In today’s world with the internet there is no longer such a lengthy waiting period. Lenders like HomePromise can now often verify your eligibility via the internet in minutes. So, myth #1 is debunked!

Myth 2.

VA Loan Rates Are Higher Than Other Loan Programs With Bad Credit

VA loans have a number of advantages to both veterans and active military members. This type of home loan requires no down payment. And to date, the VA does not specify a minimum credit score for eligible borrowers. With no down payment, the entire process can be faster than any conventional loan offered.

In addition to a potentially quicker buying process, VA borrowers with low or bad credit scores can usually enjoy rates lower than those available on conventional loans. That’s because low rate conventional loans stop at credit scores of 640 or 620. So, if your credit score is under 620 you’ll have to get a hard money conventional loan which will usually have a really high rate..

Myth 3.

Higher Default And Foreclosure Rate

It’s true most lenders deny loan applications for those with bad credit. This is due to a higher risk of defaulting and foreclosure. Truth be told, VA loan borrowers default on their loans less than FHA loans, which have similar low down payment guidelines. In fact, VA loans have had lower default rates than FHA loans for more than a decade.

Many have attempted to explain reasons why VA loans have lower delinquency and default rates than FHA loans. We won’t get into that debate here but this third myth is definitely one that everyone should agree is false.

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Why And How To Refinance Your Mortgage

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Why Refinance Your Mortgage?

When you refinance your mortgage it replaces your current mortgage loan with a new one. People refinance for many reasons. Some people refinance their mortgage to reduce the interest rate and save money, reduce their monthly payments or perhaps consolidate credit card debt. By cashing in on your home’s equity, one can stay ahead of financial goals. You might choose to refinance your home as a means to pay off your home loan faster. Another reason to refinance your mortgage might be to switch from an adjustable-rate mortgage to a fixed-rate loan.

As you can see, there are many beneficial reasons to refinance your mortgage. Read on to learn more about why and how to refinance your mortgage.

How To Get A VA Loan With A 580 Credit Score

by | | HomePromise Lending News, VA Mortgages

How to Get a VA Loan with a 580 Credit Score

The VA home loan benefit makes owning a home possible for Veterans, active service members and surviving spouses. Unlike conventional loans, The Department of Veterans Affairs doesn’t require a specific credit score. You still want to avoid having bad credit because VA lenders will still look at your credit history and may deny you based on severe credit events in your past. It’s very important to discuss your credit history with a VA lending expert at 800-720-0250.

So, while having bad credit or a low credit score doesn’t mean you’ll be denied a VA loan, a higher score may help keep your interest rate down. This will allow for more affordable payments over the life of the loan. You may also enjoy buying a home without having to make a down payment.

It’s important to keep in mind that many private VA lenders will set their own minimum credit score requirements for VA loans applicants. The average private lender usually requires a credit score minimum ranging between 580 – 660. As you can see, VA loan credit score requirements can be very different for each lender.

“HomePromise went above and beyond to answer questions and help us.” – Sandy C.

How to Get a VA Loan With a Challenging Credit History

A VA loan is a specialized type of government loan, backed by the Department of Veterans Affairs (VA). It allows you to qualify for a low-cost mortgage when you’re looking to purchase or refinance a house even if your credit isn’t perfect. If you’re on active duty in the military, a military surviving spouse, or are a veteran, you’re potentially eligible for a VA loan.

Challenging Credit History?

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When it comes to VA mortgage loans, your credit score isn’t the only thing that will be required by lenders to qualify. VA lenders will also need to determine your ability to repay the loan back. They will require proof of employment, proof of your current income, and your current debt to income ratio. Other requirements lenders must consider is your length and character of service as well.

How To Repair A 580 Credit Score For A VA Loan

If you have a 580 credit score you may not qualify for a VA loan with many lenders. Don’t lose hope because you can begin raising your score. You can call HomePromise now to see where you stand and learn more about how you can get A VA Loan With A 580 Credit Score

Several factors help VA lenders like HomePromise determine your credit score. They are outlined below.

Credit history – Your length of credit history is the length of time you have utilized credit. Consistent payments over a long period will enhance your score.
Payment History –A consistent payment history will help increase your credit score number. So, if you have been late on your debts, start paying them on time.
Credit Utilization – How you use your credit is another important factor that determines your credit score. Your score will benefit from a consistent payment history along with considering how you use your credit. If you are near the credit limit on your credit card debts your score will definitely be lowered so you want to keep your credit card balances at less than 50% of your credit limits and ideally even under 25%.
Bankruptcy. Credit scores will drop significantly for anyone after filing bankruptcy. Often it will take a while for your score to rise after you have completed a bankruptcy. The key is finding a VA lender like HomePromise who can help you qualify faster than other lenders for a VA loan after bankruptcy.
Foreclosure. Credit scores will also drop a lot when a mortgage goes into foreclosure. The score will gradually rise over time after your foreclosure. But, as a Veteran, you need to call one a HomePromise VA loan expert at 800-720-0250. HomePromise will help you qualify faster than other lenders for a VA loan after a foreclosure.
Credit Errors – There are three credit bureaus, Experian, Transunion, and Equifax and none of them are perfect. Sometimes they make mistakes that appear in your credit report causing you to have a lower score. It’s a good idea to pull your free credit report and review the information each bureau has on your history. If errors are found, work towards getting them removed to help improve your score.

Prequalifying Can Help You Start Repairing A 580 Credit Score

To take a leap forward in repairing a low credit score you should prequalify for a VA loan with HomePromise. Many times HomePromise will find a way to provide you with the VA loan you desire even if your credit score is low. But, if you don’t qualify then the HomePromise VA loan experts will give you guidance about how to raise your score. It is important to call a HomePromise VA loan expert right away to get an idea of what you need to repair or rebuild your credit in order to qualify for a VA loan in the near future. It may not be as hard as you think to get a VA loan with a 580 credit score.

Keep in mind that if you have a 600 credit score, a 620, 640 or even a 680 credit score, improving your score is worth it. Gaining a higher number will not just increase your chances of getting approved for a VA loan – it may help get you a lower rate as well.

Lenders Require Your VA loan eligibility

There is another important step in getting a VA loan. It has nothing to do with your credit score and that is checking your eligibility. Your certificate of eligibility is an important document provided by the Department of Veterans Affairs. HomePromise as a VA lender can get your Certificate of Eligibility. This document shows that you meet the service requirements required for a VA loan.

Outlined by the VA, you will find all of the service requirements for Veterans and active duty service members, National Guard members and Reserve members at the www.va.gov website.

Dishonorable Discharge

You may not be eligible if you were dishonorably discharged due to bad conduct or other dishonorable reasons. But, if you believe your dishonorable discharge is inaccurate, you may apply with the VA to have your discharge status changed.

Service-Connected Disability

If you do not meet these requirements for eligibility you may still qualify if you were discharged due to a service-connected disability. Call HomePromise now at 800-720-0250 for more information about qualifying with a service-connected disability.

How to apply for a VA loan with A 580 Credit Score

With HomePromise, you can easily apply for a VA loan online. We are a VA mortgage lending company that makes VA loans fast and easy. But, even though the process can start online, our process is personal, we don’t put computers between you and your VA lending experts.

Other mortgage lenders make the mistake of blocking you from VA loan experts but we never will. This makes our process fast and easy even when your situation is unique. All you must do to apply with HomePromise is call us at 800-720-0250. We will help get your certificate of eligibility, then we will review your proof of employment, proof of income and your other financial information. We will need similar information if you have a co-borrower. We handle the rest, call today!

Looking to apply for a VA Cash Out Refinance Loan? HomePromise Can Help.

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VA Loan Guide: VA Home Loan Benefits Simplified

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VA Loan Guide

In this article, we’ll walk you through the basics of VA lending. We’ll talk about your VA benefits, down payments, mortgage insurance, credit requirements, closing costs, and VA loan limits. If you have questions about how to get a VA loan or cash out refinance, or how VA loans are different from regular loans.

Home Loan Types

We’ll do our best to answer your questions, plus direct you to more information about more specific questions you may have.

Is It Smart to Refinance Now to Pay Off Debt?

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Is It Smart to Refinance Now to Pay Off Debt?

Many people feel that their best option to pay off debt may be cashing in on their investments. This often includes their 401k and pensions or other retirement accounts. Of course, this would never be someone’s first choice, but it can feel like there is no other way when trying to pay off credit card debt or pay off high interest debts. But there is good news! It may make sense to refinance your mortgage instead. If you qualify for a VA loan, you have unique options when struggling with debt. You may qualify for a cash-out refinance for up to 100% of your home’s value to consolidate your debts into a new VA mortgage! Getting a cash-out refinance today may be your best option.

VA 100 LTV

No Money to Pay Off Debt?

It’s common to feel nervous about using a credit card for big purchases and high bills. That’s because credit card debt is punishing, and can put people into very high debt ratios very quickly. When you have debt, using a credit card to pay for that debt feels even worse. In a way, you’re risking getting into more debt even as you try to pay off what you owe.

Save and Invest

That’s why people turn to cashing in on investments, pensions, and 401k accounts. Paying for that debt with cash feels like a safer, smarter move. You know you’ve invested and saved for a reason, and even though this wasn’t your original plan, paying off debt is a great use of your savings. But the hardest thing about it is that you are spending money that you had been counting on for retirement. Choosing between having retirement funds and having debt can feel impossible. But there is hope!

“HomePromise was willing to work with me when I didn’t have any luck with several other lenders.” – Victor M.

Cash Out Refinancing for Home Improvements

You may have been contemplating home improvements for a while, or maybe more time at home during the pandemic got you thinking about ways you can update your house. Either way, you’ll need funding for these projects.

Refinance For Home Improvements

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Before you withdraw funds from those accounts, look into refinancing your home loan. Refinancing doesn’t cost you in the same way – in fact, cash-out refinancing can help you save money! Plus, like the name suggests, it gives you cash to pocket after paying your closing costs! With your VA benefits, you can often lower your monthly payments on your mortgage with a cash-out refinance that pays off high interest debt.

You Should Not Cash Out Your 401k to Pay Off Debt

When you cash out on investments, retirement accounts, and 401k accounts, you are taking away from your future. 401k accounts are especially unforgiving. In most cases, you have to pay high taxes on whatever you withdraw if you are cashing out before you are fifty-nine and a half. And the IRS is likely to penalize you for withdrawing early, which loses you even more money.

Tax On Early Distributions

In some cases, you could get those taxes and fees waived, but this is usually only in true emergencies. Even then, many financial planners will tell you to try getting a loan first.

With VA benefits, taking away from your future doesn’t have to be the answer for you! We encourage you to look into ways your home loan can be used to pay off debt. You may be worried about your credit report when considering a refinance, because having high balance credit card debt sometimes leads to a lower credit score. That makes it more challenging to get a loan in the first place. But at HomePromise, we are known to approve people with low credit scores, so don’t give up! Later in this article, we’ll explain how to find out if you qualify with us!

How to Use Equity to Pay Off Debt

You may have lots of home equity since homes have appreciated in value a lot over the last few years. In some cases your mortgage may be much lower than your home value. That home equity is not doing much for you if you don’t access it. Paying off debt with your home equity makes sense for many people, especially when your debts have high interest rates. Refinancing with HomePromise gives you access to your home equity through a cash- out refinance.

How to Refinance Your Home to Pay Off Debt

While home equity loans can be a good option, an even better choice is to refinance. It’s simpler, because you’re changing replacing your current home loan with a new one instead of adding another. It gets you cash, just like a home equity loan but, more importantly, new first mortgage cash-out refinances typically have lower interest rates than home equity loans, which could lower your minimum payment! In principle, a cash-out refinance is a lot like a home equity loan but in many cases you can get more cash out with a new first mortgage cash- out refinance. Based on how much of your home you’ve paid off and your current mortgage balance, you’ll receive more money than you presently owe on your home, so you can pocket the difference.

But if you have significant debt, many lenders will deny you for any kind of loan. As we said before, high credit card debt may lower your credit score, and lenders also consider your debt-to-income ratio when qualifying you for a loan. Typically, they like to see very a manageable amount of debt when compared to your income. If this doesn’t sound like you, don’t give up! HomePromise is the best choice for a refinance to pay off debt because we have been known to approve people with challenging credit histories. You may even be able to use the cash you receive to make home improvements.

Cash Out Refinance with HomePromise

When looking for a lender for your cash-out refinance, look to us first! At HomePromise, we are committed to understanding your unique situation. We will walk you through how to refinance and what you need to know. Plus, we have been known to lend to people with credit scores as low as 580. Prequalify with us today to get a sense of what we may be able to do for you.

Even if you are not sold on a cash-out refinance, we recommend you call now at 800-720-0250 to speak with our home loan experts! We are here to answer your questions. Applying with us is always free – that’s the HomePromise Way.

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