One of my favorite clients called me up in panic mode and said “You’re going to decline my loan? I was late on a student loan payment a long time ago.”
No need to freak out. Let me explain the VA stance on collections and derogatory credit history.
The VA is most concerned with “What have you done for me lately?” Borrowers with a history of collection accounts should have reestablished satisfactory credit in order to be considered a satisfactory credit risk.
Isolated collection accounts do not necessarily have to be paid off as a condition for loan approval. For example; a credit report may have numerous satisfactory accounts and one or two unpaid medical or other collections. In such instances, while it would be preferable to have collections paid, it would not necessarily be a requirement for a loan approval.
If you have any questions about your options for a VA home loan or other mortgage, please do not hesitate to contact me.