Veterans and Debt Counseling, Getting a VA Home Loan

Under normal circumstances, mortgage lenders can not work with folks who are in Consumer Debt Counseling. Times being what they are, however, Veterans are able to turn to some of these services, and get another HUGE benefit!

VA Home Loans are not actually “made” by the Veterans Administration. They simply insure the lender against the possibility that the Veteran goes into foreclosure. As part of the VA Home Loan insurance to the Bank, the Veterans Administration provides the requirements for which loans they will insure. They also set down the guidelines for what kind of credit is eligible for a VA Home Loan.

When the VA says any “Qualified borrower,” they are referring to someone who has served the minimum time in the military and has met other eligibility requirements as described in the VA Lender’s Handbook. The VA does not actually set a “Qualified Credit Score” for Veterans. However, most Banks are looking for a middle credit score of at least 620. We have Veteran’s who have some rough credit who want to know if they can add another borrower to the loan. VA Guidelines say that a “Co-Borrower” who has great credit, does cannot offset the veteran’s credit issues.

Veterans and Debt Counseling, Getting a VA Home Loan

Another alternative for getting debt under control, and negotiating lower settlements with a creditor for a Veteran is a Debt Counseling Service. For the last several months we have seen Veterans who are working with NON PROFIT credit counseling agencies, and their scores are going WAY up!

Here are some of the suggestions we have (we do not work for, nor do we get any money from agencies like these – these are just our suggestions if you want to purchase a home using a VA Home Loan):

It must be a NON Profit agency that you work with.
You need to make 12 months worth of on time payments
We need a letter from the Agency stating that you are making the payments on time,and that they feel you would be able to handle a mortgage payment of “$XXX.XX”.
The Letter from the Agency must show us how the payments are being dispursed each month.

This is NOT a Bankruptcy – it does, however, usually work out that you will not be paying back as much as you originally borrowed. Most of the interest and penalty fees get waived and negotiated by the Agency. No more collection calls, that’s all handled by the Counseling Agency… #nice

The way this normally show on your credit report is this… Many collection accounts show under “Collections” on the credit report, with an updated Balance and reporting date at least one or twice a quarter. When you go into a Non Profit Credit Counseling Service – you have an account that you are now making principal and interest payments on. Normally, Veterans will have one person that they work with at the Agency, and they ask that you call them for Counseling (and learning) on a regular basis.

Let’s say you owe the following in Charged Off, or Collection Debt:

NCO / Sears / $500
ACS / Pottery Barn / $340
Provident / Citi / $950
GMAC AUTO LOANS / $2345

You and the Non Profit might work out a payment of $320 a month. You pay the Non Profit $320, and they send an agreed upon payment to each of those accounts until you pay them off. So, NCO might get $16, and ACS might get $20, and Provident might get $85, and GMAC might get $180 and the remainder would go to the NON Profit for processing all of the checks.

In recognition of the fact that they are receiving payment each month (with interest) the companies stop showing the account past due. They report no further late payments, and correctly show that the account is being paid. With the accounts being shown as “paid as agreed” the credit scores will continue to go UP! (For information about MINIMUM Credit Score Requirements for VA Home Loans, click here!)

I think this is a GREAT service for Veterans, and I encourage you to use such a service if you find yourself with accounts that are seriously delinquent! It stops the calls, it puts the budgeting into regular, manageable payments.

Disputing all of the credit on your Credit Report will NOT help you get a mortgage!

If you have questions about buying a home in North Carolina using a VA Home Loan, contact Steve and Eleanor Thorne, 919-649-5058 – NC Mortgage Experts. If you have more questions about Veterans and Debt Counseling, Getting a VA Home Loan – leave me a comment below, and I’ll try to answer it promptly 🙂 You can connect with us on Facebook and Google Plus too.