Applying for any type of government loan can help you save money and get the financing you want. The VA loan is no exception – they provide borrowers with the ability to have no down payment, low interest rates and low closing costs. The process is even easier when a veteran decides to refinance and use the VA IRRRL program to simply lower their interest rate – the VA requires very little information to process the loan. One area that might be of concern, however, is the area of federal debts. If you have a history of defaulting on your federal debts, it could hinder your ability to use any VA program, including the IRRRL. The lender will be able to determine what your history is with the CAIVRS program.
CAIVRS or Credit Alert Interactive Voice Response System, is a government ran system that helps lenders know the history of an applicant applying for a loan. The system oversees all government debts and how they are paid. If an applicant receives a clear CAIVRS, it means they are not delinquent on any government debts and the loan process can proceed. If the applicant does not receive a clear CAIVRS, it means he has a delinquency on one or more government debts.
How the CAIVRS Information can Hurt You
If you know you have a foreclosure, short-sale, or even tax lien in your past, the CAIVRS information will report it and the lender will want to know more about it. This information is used either in the place of your credit report, since it is not required for the VA IRRRL program or in conjunction to it. Lenders are supposed to give adequate consideration to the reports provided on this system. The following circumstances will be considered:
- If you have a delinquency reporting, but you have a valid repayment plan in place, the lender will need to see the terms of the repayment plan in writing as well as the proof that you have been paying it on time. In addition, the payment will have to be considered when determining the amount of your residual income to determine if you qualify for the loan.
- The delinquencies reporting on your CAIVRS report will also play a role in your credit worthiness. Every lender can use their own judgement in terms of the VA IRRRL. If your debts were brought current and you have proof of it, the lender can choose to approve you for the loan if they think you are still a good risk.
The one rule that every lender must abide by is the following: No borrower can be approved for a VA IRRRL mortgage if they are currently delinquent on any federal debt. This means that the payments are past due and you are not currently in a repayment plan or you are late on your prepayment plan.
The best way around dealing with the CAIVRS is to make good on any federal debts you have outstanding. It does not mean you have to pay them off, as sometimes that is just not feasible. It means that you must have worked out terms with the government to make good on your debts. A repayment plan will work just like any other debt – you make your payments on time and the lender will be able to approve you for the VA IRRRL mortgage, enabling you to save money every month on your mortgage payment. If you know you have a federal debt, now is a good time to start getting your payments in order so that you can get approved for a lower payment when you decide the time is right.