Category: Blog

Can I Still Get A VA Loan With Bad Credit?

Unfortunately, it depends on the situation and reasons, so there is no simple answer for bad credit. A few potential reasons could be that you have experienced a divorce which led to a bankruptcy, mismanaged your finances, experienced job loss, or any other financial hazards.

Your credit is calculated from many moving parts. The good news is that your credit score is constantly changing! If you take steps to improve your financial habits, you may also gain an improved credit score in addition to greater peace of mind.

At Benchmark, we don’t leave you to figure it out all on your own.

You are working hard for the chance to buy your dream home. Shouldn’t your lender ,at least, work just as hard?

Knowing what improvements to make when improving your credit can be tricky. That’s where we can help. For example, while some factors apply to everyone, there will be others that only apply to you.

Some strategies you could use to positively impact your score very quickly are:

  1. Keep credit card balances low: I like to call this the rule of 30. Your balance accounts for 30% of your credit score. You want to make sure that your utilization ratio is less than 30%. For example, if you have a credit limit of $1,000, your balance should NEVER exceed $300. If you are already over that, pay it down to where it is less than 30%. By far, this is the mistake that most people make.
  2. Pay your debts: This is not always as simple as it seems, but this accounts for 35% of your score. Something to keep in mind is that paying off new debt has a greater impact than paying off old debt. If you have a newer open credit card, pay that balance first.
  3. Clear up any mistakes: Did you know that as many as 4 out of 5 people have errors on their credit reports*? The odds that you may be one of them are high at 80%. While you can pull your own credit for free once a year, credit reports can be difficult to read. At Benchmark, we review your credit report with you to ensure your credit’s accuracy. If errors are found on your report, you have the opportunity to correct them.
    *https://www.cbsnews.com/news/4-in-5-credit-reports-have-errors/

Ratio of used credit and payment of debt combine to account for 65% of your score. The next biggest factor is time, or the length of your credit history. If you are trying to improve your credit, it is important that you do not close your credit card accounts. This hits you on two categories: one is your credit utilization ratio ,or how much you owe, because the ratios will not be calculated properly on closed accounts (you’d have debt, but no extra credit limit), and the other is on length of credit history, because a closed account does not report a length of time.

Chart of credit status and new mortgages
Image source: https://www.cbsnews.com/news/4-in-5-credit-reports-have-errors/

Overall, there is no single quick technique to improve your credit score. It’s best to simply live within your means, by not spending more than your income. If you’d like more information, give us a call. We can help you get a more personalized view of your credit, and help you decide what you can do to improve it.

At Benchmark, we will put together a custom action plan to help you achieve your dream of owning your own home. Call 1-800-VET-EASY, or get your Certificate of Eligibility to get started today!

VA Loan Benefits for Disabled Veterans

All eligible veterans and active duty service members can take advantage of their VA loan benefit, but those with service-connected disabilities may be eligible for additional benefits when buying a home.

VA Funding Fee Exemption

The VA funding fee is a percentage of the loan amount that veterans using their VA loan must pay to offset the taxpayer cost of the VA loan program. Veterans who receive VA compensation for a service-connected disability do not have to pay this fee. The fee is 2.15% for regular military using the VA loan for the first time with no down payment. On a $250,000 house, that could mean savings of $5,375 if you qualify for the VA funding fee exemption.

Housing Grants for Disabled Veterans

The VA offers a grant program to assist with constructing, modifying, or purchasing a specially adapted home for veterans with certain service-connected disabilities. Typically, those with service-connected injuries including loss of or loss of use of both arms and/or both legs, blindness in both eyes, certain severe burn injuries, loss of or loss of use of both hands, and certain severe respiratory issues are eligible to receive a Specially Adapted Housing (SAH) or Special Housing Adaption (SHA) Grant.

The grant can help cover the costs of modifying your home to accommodate your disability, such as modifying rooms, walkways, flooring materials, ramps, walkways, and much more. You can learn more about the grant program and check your eligibility here. Because it is a grant, the money does not have to be paid back.

Property Tax Exemptions

Nearly every state has some form of property tax exemption for disabled veterans, but eligibility and benefits can vary widely across counties and states. Talk to your loan officer, tax advisor, or local municipal tax accessors office to see if you might qualify.

Understanding Your Benefits

An experienced loan officer who specializes in VA loans can help you navigate the VA loan process. The Veterans Home Front by Benchmark is committed to making your VA loan experience easy through our easy Certificate of Eligibility service and first-class service that ensures our veterans receive the American Dream of home ownership they deserve.

Ready to get into the perfect home? Check your eligibility to get started.

(Source: https://www.benefits.va.gov/homeloans/purchaseco_loan_fee.asp)

Patriotic Family enjoying a cookout in their picturesque back yard.

VA Loan Closing Costs

A VA Home Loan, you may be aware, offers up to 100% financing for eligible veterans and military service members. This means that the Department of Veteran Affairs VA Loan program allows qualified borrowers the ability to purchase a home with no down payment and no required mortgage insurance.

However, up to 100% financing does not mean that there are no out of pocket costs for veterans using their VA Home Loan benefit. Most home purchase transactions have closing costs: typical expenses in a mortgage and real estate transaction outside of the purchase price of the home. These closing expenses might include things such as VA funding fees, loan origination fees, VA appraisal fees, credit report fees, insurance and real estate taxes, discount points, and title costs.

The good news? It is common practice in negotiations for the seller to pay for some closing costs and there are protections in place to limit the total cost of allowable origination fees charged to the buyer.

Here is an overview of some common costs associated with purchasing a home using your VA loan benefits.

 

VA Funding Fee

The VA funding fee is established by the Department of Veteran Affairs to help offset the cost of the VA loan guaranty program to taxpayers. The fee is a percentage of the loan that can vary depending on factors including your military category, whether it is your first time using your VA loan benefit, and whether you make a down payment.

The current funding fee for regular military personnel making no down payment on a first-time VA loan is 2.15%. Veterans who receive VA compensation for a service related disability, or a surviving spouse of a veteran who died in service or from a service related disability, do not have to pay a VA funding fee.

 

Loan Origination Fees

A loan origination fee is charged by mortgage lenders to cover the administrative costs associated with processing your loan. The lender may charge up to 1% of the loan as a flat origination fee, or the fee may be itemized at no greater than 1% of the loan. No matter how the origination fees are presented, the lender cannot charge you more than 1% to cover the cost of loan origination and processing.

 

VA Appraisal Fees

A VA appraisal is a required part of the VA loan process where an appraiser determines the value of the property. The cost of the appraisal depends on the location of the subject property and the type of residence but typically ranges from $475-$700.

 

Credit Report Fees

When you apply for a mortgage, the lender will pull your credit report. Typically, the cost is around $50, but this can vary based on the lender.

 

Insurance and Real Estate Taxes

At closing, lenders will often collect advanced payments on your required homeowners insurance policy and property taxes. This is commonly referred to as an ‘escrow account.’ Holding the funds in a third-party escrow account helps ensure the buyer’s ability to afford to pay the property taxes and home insurance on their new home, which is important for lenders to help mitigate potential loan risks.

Many states offer property tax exemptions for fully or partially disabled veterans. Consult with your tax advisor to see if you may be eligible.

 

Discount Points 

Discount points are fees paid to the lender at closing to reduce your interest rate. This is also commonly referred to as “buying down the rate.” Lenders will often quote you with the current mortgage rates and discount point options, which fluctuate daily.

 

Title Costs 

During your home loan process, a title company will complete a title search to verify that there are no outstanding liens or legal claims against the property. Most lenders will also require title insurance, an insurance policy that covers the lender’s interest in the property if any liens are discovered after closing.

 

Who pays closing costs? 

Closing costs may be paid by the buyer, the seller, or shared. It is common practice for sellers to pay some, or all, of the closing costs, but it is not required. With the help of your real estate agent, you can negotiate any closing costs and seller concessions into your offer.

Under the VA rules, the seller can pay for up to 4% of the total loan amount in ‘concessions’. As defined by the VA these concessions are “anything of value added to the transaction by the builder or seller for which the buyer pays nothing additional and which the seller is not customarily expected or required to pay or provide.” Items subject to the 4% rule include the buyer’s VA funding fee, prepayment of property taxes and insurance, gifts such as a TV, extra discount points, or payment of the buyer’s credit balances. So in addition to customary closing costs associated with the loan, you can negotiate with the seller to pay up to 4% of the loan in seller concessions.

Closing costs must be paid at the time of closing. The VA funding fee is the only closing cost that is allowed to be financed into the loan amount.

 

In Summary

Though this is not a comprehensive list of closing costs, it does give you an idea of the types of expenses you might face when purchasing a home. The good news is that your lender is required to provide a Good Faith Estimate of charges you will likely occur at closing. Closing costs are a normal part of every home buying experience when financing a home.

(Source: https://www.benefits.va.gov/homeloans/purchaseco_loan_fee.asp)

 

Do you have questions about closing costs or your VA loan benefits? 

Contact us by filling out the form below, and one of our VA Loan Specialists will be in contact. Thank you for your service!


Boot’n & Shoot’n Afterthought

This past weekend, I had the honor of attending the 7th annual Boot’n Shoot’n dinner and skeet shoot. I must say, at a time in our country where most agendas are driven by a politically correct narrative that takes insanity to an entirely new level, it was inherently refreshing to be around people that unconditionally love the United States of America, the freedoms it provides and the selfless service personnel that provide it. As a 3rd generation Marine, I can say without question, my soul is full after participating in this patriotic filled event. I am willing to bet that every veteran, first responder, law enforcement officer, as well as their families that were in attendance, feel precisely the same way.

I cannot begin to thank the people involved in putting together this tremendous event on a yearly basis that benefits organizations that are hyper focused on fighting for the greater good enough. From the businesses that sponsor Boot’n Shoot’n, to the volunteers, to the participants, to the individual donors, I would like to say, very humbly, thank you. Thank you for selflessly being present and intentional in regard to being a part of something greater than yourselves. You all are proof positive that you do not have to wear a uniform to serve this great nation. In other words, because of all of you, this world is a significantly better place.


 

The Veterans Home Front by Benchmark is a proud sponsor of Boot’n & Shoot’n. If you are would like to learn about your VA loan benefits, check our simple loan process and check your eligibility.