If you’re in or retired from the military and planning on buying a home, you may be wondering what the credit requirements are for VA home loans. These loans are a valuable benefit of your service, and they are designed so that they are available to the largest number of active service members, veterans, reservists, National Guard members, and qualifying surviving spouses as possible.
We’ll delve into the details you’ll need to know about VA loans, including some tips on how to handle past credit problems.
What is a VA Loan?
VA loans are part of a government loan program specifically designed for veterans and surviving spouses. The U.S. Department of Veteran Affairs (VA) guarantees these loans, making them safer from an investor’s perspective and contributing to advantageous loan terms such as a 0% down payment and more flexible underwriting guidelines.
What Is The Minimum Credit Score For A VA Loan?
These are the requirements you’ll need to meet in order to qualify for a VA loan:
- 90 days of active duty during wartime or 181 days of active duty during peacetime
- Veteran must have been discharged or released on conditions other than dishonorable
- Members of the Reserves or National Guard may be eligible upon 6 years of service in the Selected Reserve
- Un-remarried surviving spouses of veterans who died because of service-related injuries
- 580 minimum credit score
- Property must be owner-occupied
- Condominium projects must be actively approved by the VA
- Must meet the required residual income
Can I Get a VA Loan With Bad Credit?
The VA home loan program makes it as easy as possible for service members, veterans, and surviving spouses to get a mortgage even if they’ve experienced financial hardship in the past. The credit guidelines for a VA loan are relatively lenient, the minimum credit score for a VA loan is only 580.
Can I Get A VA Loan With A Foreclosure?
VA loans offer several options to avoid foreclosure on their mortgage: financial counseling, forbearance, creating a repayment plan, signing a deed in lieu of foreclosure, or engaging in a private or short sale.
If you’ve already lost a home due to a previous foreclosure of a home purchased with a VA loan, the good news is that you won’t have to wait too long to purchase your next VA loan-financed home. After a 2-year seasoning period – the amount of time you’ll have to wait – you’ll be able to apply for a new VA loan.
Can I Get A VA Loan With A Bankruptcy?
If you’ve experienced a bankruptcy, it will take you longer to be eligible for a new VA loan, but not as long as it would if you were to apply for a conventional loan. In general, if you’ve liquidated your debts through a Chapter 7 bankruptcy, you’ll have to wait at least 2 years. If you entered into a repayment plan as part of a Chapter 13 bankruptcy, you can be approved as soon as it’s discharged or dismissed if you qualify.
These are less common, but there are also Chapter 11 and 12 bankruptcies. In Chapter 11 bankruptcy, it has to be discharged or dismissed 2 years prior. A Chapter 12 bankruptcy just has to be dismissed or discharged.
Note that these waiting periods are far shorter than if you were planning to use a conventional loan to finance your home purchase.
What Should I Do If My VA Loan Application Is Denied?
If your score is below 580, you might want to consider putting off your home purchase while you work on improving your credit score, if your life circumstances permit you to do so. Higher scores mean better rates.
- Pay Off Debt: If you’re denied because your debt-to-income (DTI) ratio is too high – above 43% is pushing it, and 50% may be reason for caution – you can get started on a better financial future by paying off some of your debt before applying for a loan to buy a house. It will make your application more attractive to lenders, and your home loan will come with a lower interest rate.
- Save Up Cash: If you can, make a down payment on the home, or wait until you’ve saved up enough money to do so. Lenders feel better about making loans when they know borrowers also have something to lose. Making a down payment could also mean you save money on the VA funding fee.
- Make Payments On Time: If your credit score is too low, make it a priority to pay your monthly bills on time and for at least the minimum payments due. When you’re trying to put credit troubles behind you, the clearest signal you can send to lenders is that you are able to make timely payments.
The Bottom Line: VA Loans are there for you, even if your credit could use some improvement.
Have More Questions About VA Loans And Your Credit Score?
When it comes to VA loans and credit scores, understanding the requirements and strategies to improve your eligibility is crucial. If you find yourself facing credit challenges, don’t be disheartened; there are steps you can take to enhance your creditworthiness. JVM Lending is here to be your trusted source of information and guidance on VA loans and credit scores.
Feel free to contact us at (855) 855-4491 or email hello@jvmlending.com. We are dedicated to assisting you in achieving your homeownership goals and ensuring you have the knowledge you need to make informed decisions throughout the VA loan application process.
