Did you know that lenders check more than your credit when they qualify you for a VA loan? They also check CAIVRS or the Credit Alert Interactive Voice Response System. Only government lenders must use this system.
Learn what it means to have clear CAIVRS and how it can affect your loan eligibility.
What is CAIVRS?
CAIVRS lists any late payments that you have on government loans. This could mean FHA, VA, or USDA mortgages. It can also mean tax liens or federal student loans. CAIVRS also reports any federal loans that you defaulted on, meaning that you went through foreclosure or the charge-off process, depending on the type of loan.
What if you Have a CAIVRS Report?
If you have a CAIVRS report, you may have a harder time getting a VA loan. Just how difficult it is, depends on the situation. If your name pops up on a CAIVRS search because you are late on your current VA loan, you may still be able to get a VA loan. You just have to bring your VA loan current. How long you have to make payments before the lender will clear CAIVRS depends on the lender, though. In some cases, one payment to bring your account current is enough. In other cases, lenders want to see a full year of on-time payments before they will clear CAIVRS for you.
If you are on CAIVRS because you defaulted on a federal mortgage, though, you may be in a different boat. Typically, the VA makes you wait 3 years after the foreclosure before you can get another VA loan. That’s an issue in and of itself. But if you defaulted on a VA loan, you have another situation you must handle.
Defaulting on a VA loan means that you lose a portion of your entitlement. All veterans (that are eligible) qualify for full entitlement when they first use their benefits. This means that you may be eligible for a VA loan of up to $484,350 with no down payment. The VA guarantees 25% of that amount, so $121,087.
If you use your entitlement, it remains tied to the house that you bought it with until you sell the house and pay the mortgage off in full. Once you pay the loan off, you can petition for reinstatement of the entitlement and use it all over again. If you default on the mortgage, though, you don’t pay it in full. Instead, you leave the lender without their money. In this case, you lose the entitlement that you used to buy that home. Now, if you didn’t use it all, you may be eligible to use the remaining entitlement in 3 years to buy a home.
Ways Around CAIVRS
While it’s impossible to not have a lender check CAIVRS if you apply for a VA loan, there are ways to get around the requirements.
Let’s say you have a CAIVRS report because you fell behind on your student loans. In a perfect world, you would get current on the loan and even pay it off in full before applying for a VA loan. Since that’s not always possible, though, you may have the option to work out a plan with the lender. If the lender agrees to a payment arrangement that you can stick to, you may be able to get a VA loan even though you have a CAIVRS report.
Whether you can get around the CAIVRS report or not really depends on the lender, though. Lenders aren’t required to allow a payment arrangement as satisfaction of the CAIVRS report. If a lender thinks you pose too high of a risk, they can deny the loan until you have a clear CAIVRS.
The bottom line is that you should have a clear CAIVRS before you apply for a VA loan. If you don’t and you have a plausible reason for it as well as a solution, you may find a lender willing to give you a loan. The key is in shopping around to find a willing lender. VA lenders have what’s called lender overlays. They can add requirements onto the loan on top of what the VA requires. If you shop around, though, chances are that you will find lenders that don’t have strict requirements, allowing you to get a VA loan without a clear CAIVRS, as long as you don’t have a foreclosure.