VA Home Loan
Florida is a beautiful state with a lot to offer, especially for veterans who want to buy a home through the VA home loan program. The economy of Florida, which has shifted many times since its inception; driven by the nineteen metropolitan areas falling within Florida’s boundary, tourism, biomedical, life sciences, health-care research and retirement are the state’s most prominent industries.
The cost of living in the Sunshine State is 1.3 percent lower than that of the national Average. The unemployment rate of 5.7 percent is also below the American average, and the state has experienced job growth of over three percent. Another advantage about Florida are the popular tourist destinations, which include the Walt Disney World Resort, Universal Orlando Resort, Busch Gardens, and SeaWorld. Approximately 60 million tourists travel to Florida annually.
The veteran population in Florida is roughly 1.5 million, ranking it with California and Texas as the states with the highest concentration of veterans. The increasing population of veterans in Florida is due to the military bases which are being built in Florida.
Bordered by the Gulf of Mexico and the Atlantic Ocean, Florida is the 4th most populous state in the country. With 237 sunny days a year, tropical weather, and pristine beaches, residents often say, “Florida has it all.” For many people, living in Florida is like being on vacation every day. All these make Florida the perfect place for a VA loan home purchase.
The VA home loan is a great opportunity for veterans to achieve the purchase of their own dream house since 1944, when this program became known. The VA home loan provides to veterans a federally guaranteed home (the guaranty means the lender is protected against loss if you, or a later owner fails to repay the loan), with no down payment. The Department of Veterans Affairs, is the one who establish the rules of VA home loans for those who may qualify, and dictate the terms of the mortgages offered, and insure VA home loans against default. This special home loan program designed specifically for veterans can be issued by any VA home approved lender. VA home loan makes buying a home extremely attractive for those who have served in the military. VA home loans also offer feature flexible requirements, no private mortgage insurance (PMI), and extremely competitive mortgage rates.
Veterans Affairs loans, or VA home loans, have become lifesavers for veterans struggling to buy a home with conventional loans. Low home mortgage rates and tighter underwriting standards have led to a huge demand for VA home loans from homebuyers. Also with interest rates near historic lows, it’s no wonder so many people are considering buying or refinancing their homes mortgage loan.
This can save homeowners money over the life of the home loan (they’re paying less in interest) and lower their monthly payments. But for homeowners with less than stellar credit, buying or refinancing at a good interest rate can be difficult.
The VA home loan does not have a minimum credit requirement. It simply requires that borrowers represent a satisfactory credit risk. But ultimately VA home lenders issue the home loans, and in the current economic climate these VA home lenders are looking for solid credit scores. It’s up to them to determine whether or not your credit score meets the benchmark they set. If you find that your credit score falls short, there is still hope. There are a number of ways you can raise your credit score to meet a lender’s benchmark and receive the loan you deserve.
The VA home loan makes the loan accessible to borrowers with less than perfect credit. One of the main purposes of the program was to cut the common hassles of obtaining a home loan such as good credit, down-payment, closing costs, etc. Many veterans who have spent time overseas lack positive credit. Others lacked the funds for a down-payment. To change this, the government found that one of the best way to assist veterans after their completed service was to help them get a farm or a home. A few changes have occurred over the years, including an increase in the amount veterans may borrow and the ability for active duty to apply to get a VA home loan. The VA home loan limit varies between $417,000 to over $625,000 depending on what Florida county you plan to buy in.
The credit needed to obtain VA loans is determined by a few key factors. The most important of those are satisfactory payment history, and present and/or anticipated income. This means that your income needs to be stable and enough to cover all current bills, give you enough disposable income to meet the VA home loan standards for cost of living plus the additional VA home loan mortgage payment.
Stable income is equivalent to 24 months of consistent employment. If the time of employment is less than this, the underwriter will have to evaluate the probability of your future employment. In most areas, the FICO Credit Score must be a least 620. However, there are VA home loans for some borrowers who have no credit score or even a score less than 620. If you are without credit, qualification is determined based on past payment history of rent, car insurance and other regular monthly expenses.
To be deemed a borrower with satisfactory credit a number of factors will be analyzed. Over the past year, you may not have made any late payments. If there are any unpaid or untimely debts, your credit may be deemed unsatisfactory. Late payments however, will not result in an automatic denial. If you have a special circumstance, this rule can be forgiven.
Furthermore, if you have any open collection accounts you may still be eligible, as long as there is a timely payment plan in place. Additionally, if you are participating in a Consumer Credit Counseling program or are in a bankruptcy, in lieu of negative credit ratings, this actually can be a positive factor. The important thing is that you are currently on a regular, consistent payment schedule, and those payments are being made on time. If it has been over two years since the bankruptcy was discharged or forgiven, the bankruptcy will not play a factor in determining satisfactory credit. Also, it will not count against you if you filed bankruptcy due to circumstances out of your control (such as a medical issue not covered by insurance).
The reality is there isn’t one credit score. Lenders will look at a range of scores from the different credit reporting agencies and generally focus on the middle ground. Military borrowers have multiple requirements to hit in order to fully qualify for a VA home loan, from meeting the service standards and a lender’s credit score minimum to residual income and acceptable debt-to-income ratio. But in some respects, the general answer couldn’t be clearer.
Bad credit veterans who have VA home loan entitlement are absolutely eligible for a VA home loan, and they can start on their VA home loan application today! Nothing about your bad rating by itself is going to negatively affect your chances. In fact, VA home lenders can count disability income as effective income toward a mortgage, and borrowers with a service-connected disability are exempt from paying the VA Funding Fee, a mandatory cost the VA home loan applies to every purchase and refinance home loan to help cover losses and ensure the program’s continued success.
Being exempt from paying the funding fee is a big benefit. This fee is a percentage of the loan, and it goes straight to the VA home loan. For many first-time buyers the fee is 2.15 percent, which on a $150,000 home loan is $3,225. Borrowers without an exemption can ask the seller to pay this or pay it themselves, either upfront or over time by rolling it into the mortgage loan.
It’s not uncommon for VA borrowers to be in the process of receiving a disability rating during the purchase process. Sometimes they won’t receive word until after the VA home loan closes.
In cases like this, veterans who receive a disability rating can apply for a refund if the effective date of their VA disability compensation is before the home loan closed. You can’t retroactively apply your disability compensation once it arrives, but borrowers can choose to pay down some of their mortgage with that lump sum. There are no prepayment penalties on VA home loans.
Disabled veterans may also be able to tap into the VA’s Specially Adapted Housing (SAH) grant program. This helps veterans adapt or retrofit properties to meet their unique needs. Grants can run up to $5,000 and even $10,000 in some cases. Every borrower’s situation is different, so it’s best to contact the VA directly to determine whether you’re eligible to utilize the SAH program.
So for those with a bad credit here are some tips to boost your credit score:
What to do for build your credit?
Good credit is necessary if you plan to use credit to purchase the home of your dream someday. The only way to build a credit history is to use credit. The key to building good credit is to use credit wisely. Whenever you submit an application for a home loan, insurance or credit card; you can add new information to your credit report. If you have little or no credit history, you can build credit responsibly over time.
VA home loans have their own unique suite of approval guidelines. Additionally, VA home loan guarantee which lenders like. Furthermore, VA home loans also require the lender to verify the borrower has a responsible credit history but does not require a minimum credit score. Lenders however, do use credit scores when approving VA home loan applications with most lenders requiring a minimum score of 620 to 640.
You can calculate your credit score considering; payment history (35%), available credit (30%), length of credit(15%), types of credit (10%), and credit inquiries (10%). So the category that affects your credit score the most belongs to the payment history of the borrower. If you made your payments on time, your score will increase. If they weren’t, how late were they? Experts note late payments in terms of more than 30 days late, more than 60 and more than 90. If a payment is more than 30 days late; the scores will drop. If a made payment is more than 60 days late; the scores fall even more, and so on.
The next category is the available credit which is the amount of outstanding credit accounts compared to the credit limit assigned to the account and expressed as a percentage. The ideal amount appears to be approximately 30 percent of the credit limit. An account with a zero balance will have little to no impact. So How can a creditor evaluate your credit if you’ve never charged anything?
However, as your balance increases, you’ll affect your credit scores. If the balance goes and stays at 50 percent; credit scores will fall. If the balance goes to and remains at 80 percent; scores fall further still and severely damaged if the loan balance exceeds the credit line, even if temporarily.
So the fastest way to repair credit scores for a VA home loan is to concentrate on the first two categories; which make up 65 percent of the total score. There’s nothing one can do to affect the Length of Credit portion except wait. Those with good credit over an extended period will have better scores than new borrowers. First, make sure you make all credit payments on the due date; or at least not more than 30 days past the due date. Second; pay outstanding credit balances down to 30 percent of the available credit.
Simple activities like open a savings and checking account to manage your money; get a good job and start saving money, open a small loan and do the payments on time; and apply for a credit card and use it occasionally for small, affordable purchases will improve enormously your credit score. And remember pay your balance in full and pay it on time. If you have to carry a balance; keep it at less than half of your credit limit as to not impact your credit score. Pay it down as quickly as you can.
WHAT NOT TO DO?
Believe it or not, when you apply for credit, having no credit is almost as bad as having bad credit. And building good credit is like building your reputation, it takes time. Here are a few actions to avoid when you want to build your credit history:
- Don’t overcharge your checking account with expenses, this will increase your interest fees, and you could damage a good reference.
- Don’t apply for too much credit cards in a short period of time, this will negatively impact your credit score.
- Don’t let friends have access in any way to your bank account. You are the only responsible for the use of your accounts.
- Avoid compulsive shopping, or big expenses that you cannot afford.