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My VA Home Loan Experience (Part One)

My VA Home Loan Experience (Part One)

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Being a Veteran Has Its Advantages when You Buy a Home

By Wes O’Donnell
Veteran U.S. Army & U.S. Air Force. Managing Editor, InMilitary.com.

Editor’s note: This is part 1 of a three-part series focusing on my experience using a VA home loan to finance my new house.

I move a lot. Serving in the U.S. military for 10 years and then running my own business as a veteran, I have become somewhat of a relocation expert. In fact, I have bought and sold eight homes in a 20-year period. That’s just about one new home every two years.

During my nomadic life, I have used nearly every type of home financing: Conventional, Federal Housing Administration (FHA), cash and Department of Veterans Affairs (VA) loan. My most recent home purchase was on August 25, using the VA home loan process from start to finish.

My VA home buying experience was both quick and painless, even with my not-so-great credit. But first, why does a VA home loan make sense for some people?

VA Loans Are Exploding in Popularity among Service Members

According to California financial service company NerdWallet, “Last year, the U.S. homeownership rate fell to a 50-year low, sinking to about 63%. But the VA puts the homeownership rate among veterans at about 82%.” As a veteran of both the U.S. Army and U.S. Air Force, I must admit that there is something appealing about owning a piece of the country that I swore to defend.

One of the Attractive Features of a VA Loan Is No Required Down Payment

Nationally, VA loan volume has reached record highs, hitting $179 billion in fiscal 2016. One of the most attractive features of a VA loan is that mortgage lenders don’t require a down payment and most lenders are flexible on debt-to-income (DTI).

This is a huge benefit for service members and veterans because many active-duty military members live below the poverty line. Shocking? Quite so, but true. As a private first class in the Army in 1997, my wife applied for the Women, Infants and Children (WIC) food and nutrition program as well as food stamps.

That is the harsh reality that some service members face. We definitely don’t do it for the money.

After I left the military in 2007, I worked for corporate America for several years, increasing my credit score along the way. Then I started a small business.

When the smoke cleared several years later, my business was a resounding success. But my credit was a smoldering wasteland; my credit score had been sacrificed upon the altar of business profitability.

Despite My High Income, My Credit Score Was Too Low to Qualify for a Home Loan

In 2014, I sold my house in Texas and moved to Michigan. When I attempted to purchase a home there, I was told that my credit score was too low to qualify for a loan, despite my high income.

I found a company called Veterans United Home Loans. You’ve probably heard of it since the company advertises heavily on social media. (I should note that Veterans United Home Loans has no knowledge of this article and was unaware that I was keeping detailed notes of my transaction.)

My first interaction with Veterans United was a rejection. The minimum credit score for a VA home loan with Veterans United was 620 and my score was in the neighborhood of 540. So I was referred to an in-house service called the Lighthouse Program, which is run by Veterans United. The program is free and signing up doesn’t commit you to a purchase or any type of contract through Veterans United.

Lighthouse Works Closely with You to Develop a Plan to Strengthen Your Credit Score

Essentially, Lighthouse provides free counseling to help you identify and correct errors on your credit report that might be bringing down your score. In addition, Lighthouse works closely with you to develop a plan to strengthen your credit score and design highly personalized objectives to help you reduce your debt.

In my case, an incredibly energetic woman named Sara asked my permission to perform a “hard pull,” an in-depth review of my credit. When I gave her permission, she ran simulations to see what would be the fastest path to a 620 credit score.

It is worth mentioning that everyone is able to get a free credit report every 12 months from EACH of the credit reporting agencies: TransUnion, Equifax and Experian.

Within minutes, she told me exactly what to pay down (or pay off) to get my TransUnion score up to 620. At that point, I would be sent to a VA Home Loan Specialist to start the pre-qualification process.

In my case, she stated that I needed to:

  • Pay down the balance of my Discover card, which was maxed at $1,700
  • Pay down my Best Buy credit card, which was maxed at $450
  • Get my Visa card below $10,000
  • Settle an old collection debt (and she gave me their phone number)

Performing these steps would increase my score to just above the minimum 620. For most people, this may take a few months, perhaps a year depending on their income and cash flow. Fortunately, because of my successful business, I was able to immediately allocate just under $10,000 to follow Sara’s steps exactly.

I should note that credit scores don’t change overnight. It took about three weeks before I noticed any movement. But once it changed, my credit score was exactly where the program’s simulations said it would be: at a beautiful 624.

Three weeks into the VA Home Loan process, and with my credit score improved, I was cleared to go through to pre-qualification, and more importantly, to start house hunting.

Join me next week for Part 2 (House hunting & underwriting) of my VA Home Loan process through Veterans United Home Loans.

About the Author

Wes is a professor of Leadership and Predictive Analytics at Baker College. He is also a documentary filmmaker and recently spoke at the U.S. Air Force Academy on Veteran Empowerment in February. Most importantly, Wes is a veteran and believes that when all 21.8 million of us are united, we can change the world. Connect with Wes on LinkedIn or at wesodonnell.com

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