The Military Spouse’s Comprehensive Guide to the VA Mortgage

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You’ve stood beside your veteran or active duty spouse through thick and thin; deployment and PCS. Now you have a chance to make another impact: this time on his or her VA home loan application.

Whether you have a full-time job or stay at home, your life is hectic. That’s why I’ve listed the five most important things you, as a military spouse, can do to improve the likelihood of obtaining a VA home loan on the first try.

Pull a Credit Report

There are several different rules when it comes to credit reports and applying for a VA mortgage. In general, most lenders will look for a minimum credit score for all applicants of 620.

If you are going to be on the loan as a co-borrower with your spouse, it will be important for both of you to have credit scores above 620. If you’re not quite there yet, our Lighthouse program can help you get there. You will want to take a look at these scores at least a few months in advance of when you want to purchase a home.  This time give you the opportunity to start working on any problems with the report.

You want to be on the look out for the following red flags on your report:

  • Incorrect information of any kind
  • Judgments
  • Liens
  • Collections

If any judgments, liens or collections show up on a credit report, confirm their accuracy then get to work on taking care of them.

The cleaner your report, the higher your chance of pre-approval. For example, if you have any unpaid judgments, those will have to be resolved before purchase. If you have a tax lien, see if you can establish a payment agreement. Collections are dealt with differently depending on how large the collection is. As a general rule of thumb, you need to have less than $5,000 in total collections to move forward with a VA home loan purchase.

As you start to clean up any issues on your report, you will see your credit score increase, providing you a two-fold benefit: a higher score and one less hurdle between your family and a VA home loan.

More Resources:

VIDEO: What if I don’t have copies of my discharge paperwork?

5 Things Military Buyers Need to Know About Credit Reports

Your 3-Step Plan to Finding Errors in Your Credit Report

Cooking Up Your Credit Score: Here’s What’s Not in the Recipe

Gather Information

CA is a community property state.

CA is a community property state.

Find out if the state where you will be purchasing is a community property state.  If you live in a community property state such as California, even if a spouse will not be on the mortgage, their debts must be considered on the loan application. This means those debts will be included when calculating the applicant’s debt-to-income ratio.  If you are purchasing in a community property state, follow these steps:

  1. Refer to the credit reports you pulled for both you and your spouse and list each debt and monthly payment on paper. Regardless of whether you’re a co-borrower, debts in your name will be listed in the debt-to-income ratio.
  2. Decide if you will be a co-borrower or a non-purchasing spouse. To be a co-borrower you need to ensure your credit score is at or above 620. When you are a co-borrower your income can also be considered (assuming you meet certain criteria, outlined in greater detail here). If your credit score is below 620, you will be deemed a “non-purchasing spouse,” meaning your debts will be considered but your name won’t be on the loan. If you have a score above 620 but have no income, you and your spouse can decide which route you want to take.

Become informed about the process and what to expect. We’ve got a really great step-by-step guide outlining the entire process here. The more familiar you are with the process in advance, the more you can prepare and through this knowledge alleviate some of the stress that comes with the mortgage process.

More Resources:

Getting Your Certificate of Eligibility: Let a Lender Do the Heavy Lifting

Community Property States Can Complicate Your VA Loan Chances

Keep Documents Organized

Most VA home loan applications require that you provide a certain amount of paperwork to verify specific information. If you know that you a mortgage application is in your future start gathering and organizing the following documents now. That way you will have most, if not everything you need when requested. Here is a list of documents you’ll need to provide.

  • Bank statements for all accounts and all pages (even if they’re blank).
  • Most recent 2 years tax returns, W2s, 1099s and other tax documents.
  • Paystubs/LES.
  • DD214 Member Copy 4 (if discharged).
  • VA Disability Awards letter (if received).
  • Most recent social security statement (if received).
  • Other documents such as self-employment documentation will be situation specific, but with documents not listed, if you think it’s important, it probably is, so hold onto it.

Store all these documents in an organized and accessible location such as a traveling file cabinet or a drawer in your home. By keeping them together, organized and accessible you’ll spend a lot less time searching during the mortgage application process.

More Resources:

VIDEO: How Can I Get My Certificate of Eligibility?

What You Need to Know About Your Statement of Service

How Does Your DD 214 Help You to Get a VA Home Loan

Keep The Family Budget On Track During Deployments

This one is tough, I’m sure. You’re already dealing with your spouse being gone for an extended period of time, who wants to also mess with a budget too? Especially if this was a duty your spouse generally handles. If that’s the case, schedule a little time before deployment to make sure you understand what is coming in and out each month, then find the most convenient way for you to manage the family budget during deployment. The great thing here is it doesn’t have to be complicated.

Whether you write it down on paper or use online software to organize your budget, if you keep it simple and stay focused you can keep on track. Of course there is always that unexpected expense that pops up, so try to build an emergency fund of at least $1,000 to fall back on when the unexpected arises.

By sticking to your budget you can ensure all bills are paid on time and you don’t accrue additional debt, both of which will improve your chances of obtaining a VA home loan.

More Resources:

6 Tools to Help You Tackle a Budget

The Maker’s Mark Lesson: Do Your Budget Right

6 Ways to Trim Your Military Lifestyle Budget

Create Excitement About Saving

Saving is a pretty boring topic for most people. But, there are some creative ways to get your whole family involved and stir up a little excitement. I’ve seen lots of great ideas out there and here are a few of my favorites:

  • Plan a garage sale. But not just any garage sale, make it a competition. Assign one room to each person in your house. Or if your kids are too little to make these type of decisions, let them pick out which toys they are ready to part with. Have everyone mark their items with price on a colored sticker. You can then easily remove the sticker and chart how much each person earned for the family at the garage sale. Whomever wins gets a special treat. Whether it’s an ice cream date with dad, or getting to choose what’s for dinner, find something that will get the whole family involved in the competition.
  • Do a search for loose change. I am all about contests. Give each member of the family a cup and give them one month to see who can collect the most spare change. You’d be surprised at how much a little change can add up! Whomever wins gets to skip their chores for the next month, or another age appropriate prize.
  • Create a Dream Home Board. Have each family member look through magazines or dream up their own ideas on what features they’d like to see in the new home. Obviously some will be more attainable than others, but it gives everyone a goal to work towards. Then place a bowl near the board with a savings goal attached to collect funds. This board can provide motivation throughout the month to make savings a priority so that you can get more of the dream features each member of the house desires.

More Resources:

Organizing A Successful Garage Sale

Pinch the Pennies, Not the Nutrition: Saving Money on Groceries

Saving During Deployment

Stop Living Short: Save More, Earn More or Both?

Conclusion

As a military spouse you do so much to support your service member. By assisting in this aspect of the VA mortgage process you can make a huge impact on your family’s future.

If you have any questions about the VA mortgage process, please don’t hesitate to email me at samantha@vu.com.

Photo Courtesy of RikkisRefugeOther  and Calsidyrose.