VA loans

Things That Affect Your VA Home Loan Application

July 13, 2011

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Things That Affect Your VA Home Loan Application

There are several areas that can make a difference in your VA home loan application. Sometimes it’s not a question of whether the application is approved or turned down, but rather whether your application qualifies you for the best possible interest rate.

One of the major reasons VA loan experts encourage borrowers to shop around for a lender? Finding one who offers you the best interest rates from the outset. Qualifying for those rates is a hurdle some may have trouble clearing based on past and current credit issues. The good news–a VA loan applicant who starts preparing early can give themselves a much better chance at the best rates.

The first thing to do is begin preparing your credit at least a year in advance. Make sure you have a record of timely payments, and when you start getting your credit ready, order a copy of your credit report from the three major reporting agencies. If there are errors or disputed items, you can begin clearing them up well in advance of the loan application.

It’s important to take a hard look at any unneeded or unused lines of credit. For any type of loan, the lender may consider your potential debt as a risk factor. You may only have $300 in credit card debt, but if your card has a $2500 limit, that’s $2200 in potential debt.

VA loans don’t require the lender to review that potential debt as a qualifying factor, but an individual lender does have access to that information and a judgement call to make when it comes to your interest rates and overall eligibility.

It’s also very important to avoid applying for new credit at the same time as you apply for a VA home loan. Buying a house AND a car, for example, seriously changes your debt-to-income ratio. How would it look to you, if you were in the lender’s shoes, reviewing a loan application where there’s another major investment in the same year? If your income and cash reserves can justify such an expense, the lender may be able to overlook it, but for those who don’t have a cash reserve or high income, that other major purchase could be a liability in connection with your VA home loan.

Another aspect of making major purchases prior to a VA home loan application? How many times your credit has been checked recently. The lender has access to that data when reviewing your credit report.

If there have been recent credit reports pulled, it could count against you as it’s a sure sign you’ve been applying for credit recently. The fewer times your credit reports have been accessed in the months or year leading up to your VA loan application, the better.

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