Breaking News From the VA That Could Change the Outcome for Veterans Who Were Previously Declined

The VA has just announced a rule change that will allow more VA buyers to qualify for a home purchase and if you have a collection on your credit bureau that previously knocked you out of qualification this update is worth paying close attention to.

What Changed and Why It Matters

Under the previous guidelines if you had an unpaid collection on your credit report and it did not show a required monthly payment lenders were required to calculate an assumed payment of five percent of the outstanding balance and count that against your debt-to-income ratio.

On a six thousand dollar collection that meant three hundred dollars per month was being counted as a debt obligation even if you were not actively making any payment on that collection. That three hundred dollars was working against your qualification just like a car payment or a credit card minimum would.

Under the new VA guidelines lenders are now permitted to divide that calculated payment by twelve. On the same six thousand dollar collection the assumed monthly obligation drops from three hundred dollars to twenty-five dollars per month.

That is a significant change. The difference between three hundred dollars and twenty-five dollars applied to your debt-to-income ratio can be the difference between qualifying and not qualifying, between getting approved at a comfortable payment and getting approved at a stretched one, or between a purchase that works financially and one that does not.

Who This Specifically Helps

Veterans who have previously been told they did not qualify for a VA loan because of collection accounts should revisit that conversation. The calculation that knocked you out of qualification may have just changed in your favor.

Veterans who have been hesitant to apply because they knew they had collections on their credit report and assumed that meant a denial should now have that conversation with a lender who works with VA loans daily and understands how the new guidelines are being applied.

As Mark Clark explains the change is designed specifically to allow more VA buyers to access the benefit they earned through their service rather than being blocked by a debt calculation that was working against them more heavily than the underlying obligation actually warranted.

What to Do Right Now

If you have questions about how this rule change affects your specific situation reach out to Mark Clark directly. If you previously tried to purchase with a VA home loan and were not successful because of collection accounts the outcome may be different today under the updated guidelines.

The benefit you earned through your service deserves a fresh look with the rules that are actually in effect right now.

Sources

VA.gov
MilitaryOneSource.mil
MortgageNewsDaily.com
ConsumerFinancialProtectionBureau.gov
Investopedia.com