VA Loan Refinancing

by Carl
(Raleigh, North Carolina, USA)

Ask Kate about VA loan refinancing with old unpaid collections: I qualify for a VA cash out refi for construction -- disabled veteran with no funding fee -- but I have unpaid collections.
Carl continues... I have all VA proof in hand, good debt to income ratios (DTI) and loan to appraised value ratio (LTV), as well as documented income. I have a 640 score, my wife is at 720 score. No current debt, except for mortgage.

Problem is I have unpaid utility collections -- gas, electricity, cable, phone, and internet. One is $1700, then $450, down to $20. They total $3,000.

Most accounts are 3 to 6 years old. They are mine. The credit bureaus however are putting newer recent dates on the collections. I have never had ANY contact with the creditors except for last payment made years ago.

Being on permanent SS Disability since 1998, I find it difficult to justify paying these, especially as I am just getting by financially, and with the age of the accounts. I have 2 loan approvals at major banks with condition I pay these to get the loan.

VA consultants in Atlanta tell me these should not have to be paid due to age and small amounts. What options do I have??

Kate Answers: VA Loan Refinancing With Unpaid Collections

***zz-portrait-left.shtml*** Dear Carl, As real estate and financial markets become tougher, underwriting guidelines follow suit.

In other words, mortgage applicants experience more hoops to jump through.

So you may have to pick your poison. Pay the collections or possibly forfeit your conditional loan approval. More on this in a moment.

Appealing The VA Loan Decision

I have heard it recommended that Veterans consult their local VA center when encountering mortgage approval difficulties. It sounds like you have already done this.

Occasionally due to the appeal, the mortgage company bends. But keep in mind, the Department of Veterans Affairs does not loan the money for VA mortgage loans, only guarantees a portion of it to the lender.

Since the mortgage company is ultimately responsible for the lending decision, often the lender feels no obligation to bow to the VA request for leniency.

VA Loan Refinancing - Time Is Of The Essence

That being said, you could still try to get a letter from your VA center stating their opinion in favor of not paying the aged collections. But if you are under contract for your residential construction loan, remember time is of essence.

VA Loan Refinancing And Credit

If you choose to pay off the collections, establishing a strong paper trail to verify payment is extremely important. HOW and WHEN you pay off a collection is as important as paying it.

Besides working in conjunction with your mortgage loan professional, you can also find more help for paying off collections here.

Carl, one more thing. I'd like to hear back from you. Let me know if this page was helpful to you. Comment here on VA Loan Refinancing.

Or Ask Kate another question here.

Best wishes,



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