What is a VA IRRRL or Streamline Refinance

Quick overview of the VA IRRRL  or Streamline refinance program

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5 Basic and Important Questions about VA Loans

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Here is great Infographic answering the basic questions about VA Loans.

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How Will Multiple Mortgage Credit Inquiries Affect My Credit Score?

How does your credit affect your money?

This is an important question to know the answer to.  No one wants to do anything  intentionally that could lower their credit score, but on the flip side, you want to be a smart consumer and shop for the best rate.

Because I prefer to step into a situation fully informed, one of the things I always want to do upfront is pull a current credit report. Many of my referrals are  people who have been working with another lender but were directed my way for various reasons- difficult scenario, turn times too long at the other company and the classic… unresponsive loan officer.

More often than not, there is a bit of push back .

I don’t want my credit report pulled again.  I was told  that multiple mortgage inquiries affect my credit score.

Not nearly as much as you think

                                                                     

Being in the mortgage industry doesn’t mean that I know exactly what goes on the magic curtain that is the credit scoring algorithm. What I do know is that inquires are not all alike.

There are two types of inquiries recognized by all credit bureaus:

Soft inquiry – This is what happens when you receive a pre-approved credit offer,  or you use some specific credit monitoring services.  

Hard inquiry-These inquiries happen as a result of your application for credit – mortgage application, auto loan, credit cards etc.

Soft inquiries will generally not appear on a mortgage credit report and they do not have an affect on your credit score.

Hard inquires will show up on your mortgage credit report.  Applying for multiple credit lines in a short period of time can affect your credit score. However, an inquiry’s impact on a credit score is minimal as compared to the other factors that make up your credit score.

The impact is further minimized when those inquires are a result of rate shopping for a single loan as is common in mortgage, auto and student loans.

CREDIT CARD INQUIRIES DO NOT FALL IN THE SAME CATEGORY FOR RATE SHOPPING.

 The most common FICO credit models used today ignore multiple mortgage credit inquiries that happen within 30 days, therefore having no affect on credit scores.  The newest versions of the scoring formula consider 45 days to be the shopping period but few lenders are utilizing the newest versions.

So, if your previous lender pulled a credit report on 6/4/13, and you come to me on 7/1/13 requesting a second opinion, you have two choices. 

1. Provide me a complete copy of that credit report so I can properly analyze it. What? You never got a copy of it? Well then…
2. Let me obtain a new credit report now!  It will be within the shopping period and I’ll eventually have to obtain a credit report of my own when you realize that leaving your unresponsive lender for me is what you should do.

It is important to note that a mortgage credit report may show different scores than the report you obtained online or even the report you got when you applied for a car loan.  Each report is formulated using different scoring formulas, this is why it’s important to view a recent mortgage credit report.

There are many theories, myths and misunderstandings about how credit scores work.  There is no exact number that I can provide to answer how multiple mortgage inquiries will affect your credit score. 

One thing is for certain, not paying your debts on time will definitely affect your credit.  

Be an informed and responsible consumer.

Understanding VA Loans in Today’s Market

Whether you are a First Time Home Buyer, a current home owner looking to buy your next home or an experienced homeowner looking to size down, today’s market conditions can seem confusing and overwhelming.

So what are the basics of qualifying for a VA Mortgage?

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The First Step is to determine your eligibility for VA financing

You must fall under the eligibility requirements (list not exhaustive but includes some of the most common categories)

Eligible Person Time Required

Active Duty Member………………………..90 Days (181 during peacetime)

Former Active Duty (1990-present)…..2 Years

Reserves/Guard……………………………..6 years in Selected Reserves

Unmarried Surviving Spouses…………..No Time Requirement- veteran must have died on active duty or from a service-connected disability

POW/MIA Spouses………………………….The spouse of an active duty member who is listed as missing in action(MIA) or a prisoner of war (POW) for at least 90 days

Next is meeting the credit worthiness requirements for VA Loans

Credit History

• • Minimum credit score of 620
  • Bankruptcy (Chapter 7)- Generally the requirement is 2 years from discharge date. It is possible to qualify for a mortgage in less than 2 years if the bankruptcy was filed due to circumstances outside of your control (example: unemployment, medical bills not covered by insurance.  Divorce is NOT considered to be outside of an applicant’s control
  • Bankruptcy (Chapter 13)- If all payments have been made and the bankruptcy has been discharged, the applicant is eligible to apply for a mortgage.  If the bankruptcy has NOT been discharged, the applicant must show proof of making at least 12 payments and must obtain approval from the court to apply for the loan
  • Foreclosure/Short Sale- Same as Chapter 7 Bankruptcy.  If foreclosure was on a VA loan, you might not have full entitlement which would then require a down payment

Employment/Income

• • A minimum 2 year history must be verified.  If active duty, less time is acceptable as long as the minimum service requirement for eligibility has been met. A Verification of Employment will be obtained by your lender for each employer listed
  • Employment must be verified as being in the same industry/field.  If you recently graduated from school and have a job in which you don’t have a full 2 years experience, verification of schooling could satisfy this requirement
  • Retirement, Disability, alimony and child support income does not require a 2 year history but verification that it will continue for at least 3 years is required in order for it to be included
  • Income must be shown to be stable and likely to continue.  When attempting to use overtime, bonuses, part-time employment etc, a 24 month history is generally required.  You will need to provide current pay stubs, 2 years of W-2’s and 2 years of Federal Tax returns

Assets 

• • You must have sufficient cash to cover any closing costs or fees not paid by the seller
  • VA does not require additional cash to cover a certain number or mortgage payments or unplanned expenses (cash reserves), however, your ability to accumulate liquid assets and the amount of assets currently available is taken into consideration int he overall credit worthiness analysis.
  • You will need to provide 2 months of current bank statements to verify your current assets.

Debt to Income Ratio requirements

The rule of thumb is this : All monthly obligations (car payments, credit cards, student loans, alimony, child support etc) and new estimated mortgage payment should not exceed 50% of the usable, gross monthly income.  However, higher percentages can be approved.

Excellent credit history, good employment history, good cash reserves, little to no increase in housing payment are compensating factors that will be considering when allowing higher debt to income ratios.

                                                                                               

Current VA loan limits for 100% financing are:

San Diego County:          $537,500

Riverside County:            $417,000

Orange County:                $700,000

Contact me for a FREE consultation to get you on the road to homeownership.

  laura@lauraborja.com

 Direct: (858) 3-LOAN-SD

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