1. VA home loans with low credit scores (around 500) are possible, but typically require extenuating circumstances to be approved.
2. The two most commonly accepted extenuating circumstances are medical issues and job loss due to layoffs, which must be well-documented and coincide with the dates of credit issues.
3. A strong letter of explanation is crucial, detailing the timeline of events, providing evidence, and demonstrating that the issue has been resolved and the applicant is now financially stable.
Take the 30 second mortgage quiz to see if you qualify
If you’re a veteran or an active-duty service member looking to secure a VA home loan, you might be concerned about past financial challenges impacting your eligibility. Life can throw unexpected curveballs, and sometimes these lead to financial setbacks like bankruptcy or foreclosure. Fortunately, the VA home loan program understands that not all financial difficulties are within your control. This is where extenuating circumstances come into play.
The VA home loan is extremely flexible because it allows lenders to consider extenuating circumstances and use common sense when making an underwriting decision.
These standards are outlined in Chapter 4 of the VA Handbook.
Some examples of allowable extenuating circumstances include:
If you have bad credit and recent delinquency, it can be very hard to get approved for a VA home loan. On a manual underwrite, lenders will require that you have no delinquencies that have occurred in the past year.
However, if you have extenuating circumstances, recent delinquencies are allowed as long as the cause of the delinquency has been resolved.
Standard VA guidelines state that there is a two year waiting period after a Chapter 7 bankruptcy, foreclosure, or short sale.
This waiting period is reduced to only one year if there are extenuating circumstances that caused the bankruptcy or foreclosure to occur.
Take the 30 second mortgage quiz to see if you qualify
To benefit from reduced waiting periods, you’ll need to provide thorough documentation to support your claim of extenuating circumstances. This documentation should clearly demonstrate the event’s impact on your finances and show that it was beyond your control.
Take the 30 second mortgage quiz to see if you qualify
If your situation is unique or complex, your lender might use manual underwriting. This process involves a more detailed review of your financial situation and the extenuating circumstances affecting it.
Consider the case of John, a veteran who faced significant medical bills after a serious accident. Despite a bankruptcy on his record, John provided detailed medical records and a letter from his doctor. With this documentation, his lender was able to reduce the waiting period for his VA loan, allowing him to purchase a home sooner than expected.
Take the 30 second mortgage quiz to see if you qualify
I can originate VA mortgage loans anywhere that I’m licensed.
I’m licensed in Alabama, Arkansas, Arizona, California, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Minnesota, Mississippi, Missouri, New Mexico, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Washington, and Wisconsin.
Additionally, our team can originate mortgages in several additional states through our corporate referral program.
Understanding and documenting extenuating circumstances can significantly impact your ability to secure a VA home loan. By providing thorough documentation and working closely with your lender, you can overcome past financial challenges and achieve your dream of homeownership. Remember, the VA home loan program is designed to support veterans and service members, recognizing the unique challenges you may face.
For more information, click here to contact me.
If you’ve been denied for a VA home loan by major lenders like Veterans United or Rocket Mortgage, don’t lose hope. You still have a strong chance of getting approved. The reason? Many big online lenders enforce additional rules known as lender overlays, which go beyond what the VA itself requires.
Manual underwriting is a process that involves a human underwriter reviewing an applicant’s financial information instead of an automated system. This process can be used for VA loans when the VA’s algorithm doesn’t approve an applicant, or when an applicant has certain negative items in their credit history.
Are you worried about your credit history affecting your chances of getting a VA home loan? In this video, we break down the VA’s rules regarding credit occurrences and explain how you can potentially overcome credit challenges.
Take the 30 second mortgage quiz to see if you qualify
