When the recession hit in 2008, over three million people experienced a foreclosure on their homes. The rate of foreclosure jumped by 81 percent (225 percent from two years prior), an unforgiving economic climate left many in dire financial straits. A short six years later, the economic reverberations are still felt by many. Younger Americans (aged 18-34) are especially vulnerable, average salaries have dropped for this group by nearly $2,500 (since 2008). 42 percent of those among this age group are currently in debt, with a paltry $10,400 equating to a greater net worth than 50 percent of under 35’s. Thin files, debtors, a lack of health care leading to bankruptcy are just a few of the problems compounding and creating bad credit scores.
Many Americans are having a hard time securing a home loan with bad credit. Thankfully, for eligible applicants the VA home loan is available. Because the loan is insured by The Department of Veterans Affairs, financing is more easily securable. Among the many appealing facets of the loan is that no minimum qualifying credit score has been determined by the VA. Applicants will not be rejected for this loan for the individual reason of poor credit scores. Furthermore, borrowers are generally only judged by their previous 12 months of credit history.
This does not mean that bad credit won’t negate financing though. The majority of lenders will determine their own underwriting guidelines, which generally include a minimum score expectation. This is entirely variable from one lender to the next. Applicants with files heavy in unpaid debt, collections and judgments may have a hard time receiving financing approval. Under these circumstances a lender may still work with a borrower if they are provided with an adequate explanation of the specific financial hardships.
Remember, your credit score is only one piece of the puzzle used by underwriters to determine what amount you can get approved for. Underwriters will examine your entire credit profile instead of just your FICO score.
Whether you are looking to purchase a home, or refinance your current home loan, options exist. For assistance with pre-approval, contact VA Home Loan Centers today!