Wednesday, November 6, 2013

How do collections and charge offs on the credit report affect a Kentucky VA Mortgage Loan Approval?

Kentucky VA Mortgage Loan and collections and chargeoffs on credit report. Can I still get approved for a VA mortgage in Kentucky?


In order to get approved for a Kentucky VA loan with outstanding collections and charge offs listed on the credit report, the VA underwriter will want to know the following about them:

If you get an automated approval through DU (Desktop Underwriting) that is typically used for the initial pre-approval then the following apply:

Medical Collections and charge offs on the credit report are not required to be paid.

Other collections that are not medical on the credit report , and over 24 months ago, will not be required to be paid.

If your automated DU  VA loan pre-approval comes back as a refer/eligible on the underwriting findings, then file has to be underwritten as a manual underwrite and  the following apply:

Medical Collections and charge offs  on the credit report  are not required to be paid off.

Other non-medical collections must be paid prior to closing no matter if it happen over 24 months ago on the credit report



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If there are  past due accounts listed on the credit report in the last 12 months, and the findings come back as a refer/eligible, then the Kentucky VA Mortgage Loan  approval must be looked-at to see if the accounts can be paid at closing with borrower's funds.

The VA underwriter will want to verify the Kentucky Mortgage Veteran has the ability to pay these items or will want to know how they were paid off before closing.

Any collection or charge off showing as a judgement or lien on the VA mortgage applicant's credit report,  must be paid before closing. These affect the title and must be paid before the mortgage is recorded.


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Joel Lobb (NMLS#57916)
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