Typically, a person with bad credit will have difficulty securing a home loan. Lenders may consider him too much of a risk, even if he's paid all of his bills on time in recent months. The Department of Veterans Affairs (VA), however, offers a home loan program through which veterans and active-duty serviceman can buy real estate despite low credit scores.
Step 1
Determine whether you are eligible for a VA home loan before considering your credit. You may be eligible if you served in the military for at least 90 days during a war or 181 days during peace time. You may also qualify if your spouse died while serving in the military or because of a condition connected to his time in the Armed Forces.
Step 2
Keep your credit clean and pay your bills on time for 12 months prior to applying for a VA loan. Qualifying is not based on your credit score. Instead, it's based on whether or not you've kept up with your payments over the last year.
Step 3
Wait two years and re-establish a good payment history after having debts discharged in a chapter 7 bankruptcy. Though bankruptcy will lower your credit score, you can still secure a VA loan as long as your payment history has been unblemished in the two years following discharge.
Step 4
Make all of your payments to the court on time for a full year after court approval of your chapter 13 bankruptcy repayment plan. You'll also need approval from the court's trustee to obtain a VA loan with chapter 13 bankruptcy.
Step 5
Wait two years after foreclosure on a previously owned property. If the foreclosure involved a VA home loan, you may not be eligible for a new VA loan.
Step 6
Have your spouse cosign on the VA home loan if she has a good bill payment history. Her income will be considered as well, which may help you to qualify for a larger loan amount. The VA may guarantee the entire amount for which you are eligible--called your entitlement--if a veteran's or serviceman's spouse is the cosigner.
Step 7
Ask a non-spouse cosigner to help you to secure a VA home loan. However, the VA will not guarantee the non-veteran's portion of the loan. For this reason, it may be difficult to convince a lender to grant a VA loan with this type of cosigner.
Tips and Warnings
You may qualify for a VA loan even if you do not have a traditional credit history, which typically includes credit card and loan use. The VA home loan program may allow you to use rent and utility payments to show a history of paying on time.
The amount of loan you qualify for will depend on your income and current debts. For VA loans, your debt-to-income ratio has to be 41 percent or less. This means your current monthly debts and your proposed home loan payment cannot total more than 41 percent of your income.
How to Buy a VA Home With Bad Credit
by HomeLoan.comStep 1
Determine whether you are eligible for a VA home loan before considering your credit. You may be eligible if you served in the military for at least 90 days during a war or 181 days during peace time. You may also qualify if your spouse died while serving in the military or because of a condition connected to his time in the Armed Forces.Step 2
Keep your credit clean and pay your bills on time for 12 months prior to applying for a VA loan. Qualifying is not based on your credit score. Instead, it's based on whether or not you've kept up with your payments over the last year.Step 3
Wait two years and re-establish a good payment history after having debts discharged in a chapter 7 bankruptcy. Though bankruptcy will lower your credit score, you can still secure a VA loan as long as your payment history has been unblemished in the two years following discharge.Step 4
Make all of your payments to the court on time for a full year after court approval of your chapter 13 bankruptcy repayment plan. You'll also need approval from the court's trustee to obtain a VA loan with chapter 13 bankruptcy.Step 5
Wait two years after foreclosure on a previously owned property. If the foreclosure involved a VA home loan, you may not be eligible for a new VA loan.Step 6
Have your spouse cosign on the VA home loan if she has a good bill payment history. Her income will be considered as well, which may help you to qualify for a larger loan amount. The VA may guarantee the entire amount for which you are eligible--called your entitlement--if a veteran's or serviceman's spouse is the cosigner.Step 7
Ask a non-spouse cosigner to help you to secure a VA home loan. However, the VA will not guarantee the non-veteran's portion of the loan. For this reason, it may be difficult to convince a lender to grant a VA loan with this type of cosigner.Tips and Warnings
References