This could really be just a five-word post: You don’t get the loan. But let’s provide a little more background and help before calling it a night.
First, remember that the only acceptable co-borrower on a loan is a spouse or another veteran. Most married couples pursue a VA home loan together, with each obliged on the mortgage note. There are a host of reasons why, but one of the simplest is that a husband or wife may not have enough income to purchase the home of their dreams on his or her own. Adding in that second income of a spouse can sometimes do wonders for your purchasing power and debt-to-income ratio.
If you’re worried about your credit, Veterans United’s Lighthouse program can help you get on the right track.
And here’s the rub. All parties on the mortgage will have to meet VA and lender requirements. The VA mandates that borrowers be a “satisfactory credit risk” but offers no strict credit criteria. Lenders, on the other hand, want to see a hard number, and in the current economic environment it’s a score of at least 620.
So if you have a 700 score but your spouse is in the low-600s, you’re going to be on the outside looking in, at least until he or she gets that score to the 620 level. Lenders can’t take an average of the scores or just shuffle an application along; those credit score benchmarks have no give when there’s someone with bad credit.
Coping with Credit Issue
There are a few ways to combat the problem. One is to see if you can get preapproved for the desired loan amount without your spouse’s income. In some cases that will cure the problem immediately. But many other prospective borrowers won’t be so lucky.
For those couples, diving headfirst into the credit issue may be the best solution, even if it throws off your homebuying schedule. Prospective borrowers who come to Veterans United and can’t quite clear the credit hurdle will turn to our Lighthouse Program for help. This is a unique wing of the company that works for free with veterans and active military to boost credit scores and get on track for loan prequalification.
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