Even though VA loan eligibility is more lenient than other mortgage programs, your credit score is still a big deal.
How do I know?
Because one of the most common questions we get is:
What’s the minimum credit score required for a VA loan?
But here’s some good news:
Meeting the credit score requirements is easier than you might think.
Here’s what you need to know about how your credit history can affect your VA loan, and what to do if you’ve had a bankruptcy or foreclosure.
BASIC VA LOAN ELIGIBILITY
VA loans help veterans buy a home without worrying about saving up a down payment.
That means you must be a veteran to be eligible for a VA loan.
While the Department of Veterans Affairs backs VA loans, you apply through a private lender.
There are specific service requirements you must meet. And you’ll need documentation to prove to the lender that you qualify.
MINIMUM CREDIT SCORE FOR A VA LOAN
Believe it or not, VA loans don’t have a minimum credit score.
Except there’s just one problem…
The VA doesn’t issue loans (they only guarantee them). It’s up to the private lender to determine the lowest score you can have and still qualify.
Generally, lenders require a minimum credit score of around 600.
You should aim for at least 640 to increase your chances of getting a better interest rate.
WHY YOUR CREDIT SCORE STILL MATTERS
I can hear you now:
If there’s no minimum, why does my credit score matter?
Well, for one reason:
To save you money!
Let me explain.
The better your credit score, the lower your interest rate on your VA mortgage. And a lower interest rate can lower your monthly mortgage payment.
Do you know what that means?
You’re spending less money on interest fees and keeping more cash in your pocket from month to month.
HOW A BANKRUPTCY OR FORECLOSURE AFFECTS VA LOAN ELIGIBILITY
If you’ve had a bankruptcy, foreclosure, or even a short sale, you’re not alone.
Between 2005 and 2017, the Judiciary and Data Analysis Office reported 12.8 million bankruptcy petitions were filed.
Getting a mortgage after bankruptcy or foreclosure can feel like an uphill battle.
After all, it can stay on your credit report for up to 10 years!
Now, here’s the big secret…
VA loans let you bounce back after just one or two years.
And some lenders won’t make you wait at all following a short sale.
Compared to a conventional loan usually taking four to seven years before you’re able to buy again, a VA home loan can feel like a breath of fresh air.
WHAT TO DO IF YOU DON'T MEET VA CREDIT REQUIREMENTS
Because credit requirements are up to the individual lender, you might run into a situation where you don’t meet eligibility criteria.
That can be disappointing, but there is something you can do:
Take steps to improve your score.
There are five simple ways to bump up your credit profile:
- Always pay your bills on time (no matter what!)
- Don’t open new credit cards or take out new loans
- Keep credit balances low
- Pay off credit cards and loans if you can (but keep the accounts open)
- Ask for a credit limit increase to lower your credit to debt ratio
If missing a payment worries you, consider setting up your bills with autopay. That way, you won’t have to pay a late fee or stress about a late payment showing up on your credit report.
There is one more thing.
Check your credit report for errors. You might think it won’t happen to you, but a Federal Trade Commission study revealed that 20% of people have a mistake on at least one of their credit reports.
VA LOAN ELIGIBILITY GOES BEYOND YOUR CREDIT SCORE
Lenders rely on your credit score to determine if you’re creditworthy. It helps them to see how likely you are to pay back the money you borrow.
However, your eligibility is more than just your credit score. Lenders also review your:
- Work history
- Address history
- Gross monthly income
- Any other income
- Current mortgage payments (if any)
You also need to get a Certificate of Eligibility. You can apply online through the eBenefits portal.
Otherwise, your lender can help you get your VA certificate.
READY TO GET YOUR VA LOAN?
If you’re ready to take advantage of one of the best mortgage products out there, and you’re a current or retired military member, what are you waiting for?
Contact the Wendy Thompson Lending Team for expert help to get the house of your dreams.
Not only are we a top-ranked VA loan and Mortgage specialist, but we also love working with Vets!
Deciding on a VA lender can make or break your home buying experience. Go with the wrong one, and you risk losing out on valuable money-saving strategies.
But the right one can make all the difference.
Let’s get started on the path to your new home!