You know lenders check your credit when you apply for a VA loan, but there’s another system you may not even be aware of that they check. It’s called CAIVRS, or Credit Alert Interactive Voice Response System. This database tracks late payments or delinquencies on federal loans. A hit in this system could leave you without the VA loan you want.
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In order to secure VA loan approval, you must pass the CAIVRS screening. This means you can’t have any late payments on a VA loan, FHA loan, Department of Education loan, SBA loan, or any other federal loan. If you are currently delinquent, the VA cannot approve you for a loan. In other words, no VA lender can fund a loan for you.
How Lenders Check CAIVRS
CAIVRS is a system or database that VA lenders can check. It’s similar to what lenders go through when they run your credit. When the lender runs your information through the system, they look for hits on your name. If your name comes up, it means you have defaulted on some type of federal loan.
Clearing CAIVRS
If you do have a defaulted federal loan, the quicker you get current on it, the better your chances of approval on a VA loan. You want to bring the account current and/or pay it off as soon as you can. For example, if you have student loans that you defaulted on, see about getting a repayment plan in place. The repayment plan will help you catch up on your payments.
Just how long you have to make payments on a repayment plan depend on the lender. Some will clear CAIVRS after just 12 months of on-time payments. Other lenders may require a longer period of on-time payments to make sure that you are a good risk.
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If you defaulted on a government-backed mortgage, you may have to wait up to 3 years before you can get a VA loan again. In fact, if you defaulted on a VA loan, you lose that portion of your entitlement. For example, if you defaulted on a $200,000 loan, you lose entitlement for that amount. Since the VA guarantees 25% of your loan amount, you would lose $50,000 in entitlement. You are not able to have this restored since you defaulted on the loan.
Shopping Around for VA Loans
Keep in mind that different lenders have different requirements. While there is no way to get around a hit on your CAIVRS report, you may get a loan if you get current on the loan. Because each lender can set their own requirements, you may have to shop around. If one lender turns you down, you can always try another VA lender to see if they are willing to give you a loan.
Of course, it’s ideal if you have a clear CAIVRS from the start. If you don’t, you can find ways to get a VA loan if you get current on the debt you defaulted on. If you lost a home with a government-backed mortgage, you’ll have the longest wait, but you may be able to bounce back and get that second chance that you deserve.
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