Big VA Loan Guideline Change

BIG VA LOAN GUIDELINE CHANGE

From: Gregg Pechmann with Ross Mortgage

This is a HUGE win for VA borrowers.

VA has updated its guidance in the VA Lenders Handbook, VA Pamphlet 26-7, Chapter 4, regarding how non-medical collections are calculated.

Previously, lenders could be required to count 5% of the outstanding collection balance as a monthly payment when qualifying the borrower.

Under the updated guidance, the calculation is now:

5% of the outstanding non-medical collection balance ÷ 12 months

That is a massive difference.

For example, let’s say a veteran has $10,000 in non-medical collections.

Under the previous calculation:

$10,000 × 5% = $500/month

Under the new calculation:

$10,000 × 5% ÷ 12 = approximately $42/month

That could make a significant difference in a veteran’s debt-to-income ratio and ability to qualify for a home.

The calculation is now much more similar to how VA handles certain student loan payments.

And an important reminder: Medical collections do not require a monthly payment to be counted.

This change is already reflected in VA Pamphlet 26-7.

For veterans who have collections on their credit report and were previously having trouble qualifying, this could be a game changer.

GET MORE INFORMATION

Ed Dembowczyk

Agent License ID: 351915