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VA Hybrid Loan Qualifications

Once you’ve determined that you’re eligible to apply for a VA hybrid loan, there are some things you need to do to make sure that you will qualify for the loan.

Credit Check

You can often get a good loan even with a low credit score and a short credit history.

One of the key factors in securing a good deal on a home purchase is having a high credit score. But it’s a little different with VA loans—you can often get a good loan even with a low credit score and a short credit history. This is particularly true for a hybrid loan because it will always give you a lower interest rate than you would get with a conventional loan.

The lack of an established credit history does not mean that you cannot get approved for a loan. A satisfactory payment history for utilities or rent can show that you are responsible with your monthly bills and can substitute for an established credit history.

If you’re thinking of applying for a loan in the near future, it’s a wise idea to pull your credit reports and check for any inaccuracies. If you find any, those inaccuracies should be disputed and taken care of before you start the loan process.

Bankruptcy

You can even apply for a VA hybrid loan just two years after Chapter 7 bankruptcy has been discharged. A full explanation of the bankruptcy will be required along with the re-establishment of good credit. In this situation it is an absolute must to show that you have a stable job and steady income.

The situation is a bit different with Chapter 13 bankruptcy. You can still be paying on Chapter 13 bankruptcy and receive a VA loan—but you must have been making on-time payments for at least one year. Once again, a full explanation of the bankruptcy, a stable job, and the re-establishment of good credit will be required.

Income

There is not usually an income requirement for those who apply for VA hybrid loans. But borrowers are expected to have reliable income to show that they will be able to make their new mortgage payment. You should also consider the caps on VA hybrid loans and how high your payment could go once your fixed-rate period is over.

The VA also requires that borrowers have a certain amount of income left over each month after all of their major expenses are paid. This residual income requirement keeps defaults low by ensuring that applicants can meet financial obligations and have a cushion in case of an emergency. The residual income requirement is particularly important for those applying for hybrid loans.

Your debt-to-income ratio is the percentage of your monthly gross income that goes toward debt.

Your debt-to-income ratio is the percentage of your monthly gross income that goes toward debt. The VA’s acceptable debt-to-income ratio is 41%. Strive Lending can help you figure out what your current debt-to-income ratio is. It’s a complicated process because there are exceptions and variables that can affect your final ratio. If your debt-to-income ratio is higher than the VA’s threshold, you can lower it by paying off debt before applying for your hybrid loan. Strive Lending can discuss your options with you so that you will be eligible for a hybrid loan as soon as possible.

Certificate of Eligibility (COE)

Anyone who receives a VA loan will have to have filled out a Certificate of Eligibility (COE). This is what verifies to the lender that you are indeed eligible for a VA loan. You do not have to have the COE before you start the loan process.

The kind of evidence you need to have to establish your eligibility depends on several factors. See a helpful table here, but it shouldn’t be too difficult to get the required information and fill out the form.

Strive Lending will help you with the COE process, if desired. For those with sufficient data in the VA’s system, lenders can establish and issue a COE in just a few minutes. If you prefer, you have several other options. You can fill out and submit the form online, or you can download it, print it, and mail it to the VA. A side note: spouses must apply by mailing in this form.

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