Hello. I’m trying to pre-qualify for a mortgage, but my circumstances are abnormal. I’m a first-time buyer, VA. My credit score under 600, but I have $470,000 in my account and a salary of $120k per year. I pre-qualified two years ago for $400K but changed my mind. Can you help me? The home is in North Dakota.
– Cynthia in North Dakota
Charles Puleri from CrossCountry Mortgage explains…
Hi Cynthia,
First, congratulations on taking the step to buy your first home. And you’re doing the right thing by getting pre-qualified. It will help you make sure you can afford the home you have in mind and it shows buyers you’re serious when you make an offer.
The good news is that VA loan is very lenient when it comes to the mortgage guidelines for Veterans when it comes to credit score, down payment, and debt-to-income ratios.
Most Veterans can do 100% financing for their VA loan, meaning you can secure a loan with no down payment. Although it sounds like you have plenty of capital to cover the down payment.
Obtaining a VA certificate of eligibility
Your ability to pre-qualify will depend on your COE (certificate of eligibility) with the VA. This is based on your military service status. There are different documents that you will need to apply for the COE, depending on whether you are a Veteran, active-duty Service Member, Guard, or Reservist.
Veterans need a copy of their discharge or separation papers (DD214). You can find a list of qualifications for other service statuses through the VA website.
You can apply for the COE through the eBenefits portal of va.gov.
The COE essentially affirms to lenders that you qualify for a VA loan. Once you have it, you can go to a private bank or mortgage company to pre-qualify.
Will a low credit score hinder pre-approval?
Given the scenario you describe with your finances, it seems like you should be able to secure a VA loan. You have great income and assets. The only point of contention seems to be your credit score. However, VA borrowers can have a credit score below 600 and still qualify.
Just be aware that a lower score will likely mean that you’re looking at a higher interest rate on the loan. This will increase the total cost of buying a home, as well as your monthly payments. But given your income, that may not be an issue.
A loan specialist would need to look at your credit and crunch the numbers with you. They can help you calculate the cost on the new property with the principal and interest payments, plus the taxes and insurance. They will also check your debt ratios based on the other debts listed in your credit report. All of this will tell you if you qualify to purchase the home you have your eye on.
But overall, Cynthia, it seems like you have a pretty strong case to qualify. Many Veterans do not have those assets or that salary, so you have things that are working in your favor, even though your credit score is low.
If you have more questions, call me at 954-415-6232 or email [email protected].
