Purchasing a home is one of the most significant purchases you will ever make in regards to your finances. Your and your spouse will consider tons of smaller decisions leading to that monumental choice, like whether your family is happy in your current home or if you need extra space.
However, your credit score is an underlying factor when it comes to applying for home loan options, stopping you from landing your dream home.
Fortunately, the Department of Veteran Affairs offers VA Loans to you and other qualifying veterans and active-duty military that ease credit requirements. This government agency backs your home loan, which allows lenders and private banks to offer a more reasonable minimum credit score when buying a home.
Depending on who you work with, they can be flexible with your VA Loan by offering alternatives to still get your family the financial lending you need.
Before finding and falling in love with your dream home, it is wise to know your credit score, what factors may affect your credit report, and what minimum requirements you must meet to make the dream home yours.
How Does a VA Loan Work?
The way that VA Home Loans work is very simple. The Department of Veteran Affairs will back loans from qualified lenders to help veterans and active duty service members purchase homes. The actual loan comes from a private lender, but the VA will help facilitate to ensure that you get better terms.
Most times, the borrower will need to pay a VA funding fee, which varies depending on the loan amount and the down payment, among other factors. The typical amount is 2.3% of the loan amount.
While there are other options for home financing, including FHA loans, VA loans are almost always the best option for eligible veterans and service members. These loans require no down payment or private mortgage insurance to make it more affordable.
Who determines the credit score requirements?
Although the VA developed and supports the VA Home Loan program, this entity does not offer the loan and cannot set the VA loan credit score requirements for 2022.
The mortgage company, bank, or lender your family partners with will establish your credit score requirement. This standard will determine whether you are eligible to receive a VA Loan from them or not.
Each private home loan party is different and establishes their own minimum credit score policies. So if you do not meet the financial requirements with one institution, you can choose a different VA lender who is more flexible and willing to work with you.
We believe the best VA Mortgage Lenders look at your unique financial situation as a whole rather than solely judge your repayment ability from a single number.
What are the minimum VA credit score requirements in 2022?
Lenders who offer VA home loans do not strictly set a minimum credit score requirement in many cases, unlike those that offer conventional and FHA loans. They will honor your military service and consider other factors, such as your employment history, current income, down payment amount, and other debt levels.
In general, we recommend you have a score of at least 620 when applying for a VA Loan amount with a higher acceptance rate and lower mortgage rate. Your credit score requirement may change depending on the VA option you choose.
It is dependent on the individual lender at the end of the day, who sets the minimum VA credit score requirements. These numbers are suggestions and you can still be eligible for a VA Home loan if your credit is beneath the average.
VA Home Loan
While regular VA Home Loans, the typical lender will ask for at least 580 to obtain the best monthly payments.
VA Jumbo Loans
VA Jumbo Loans skyrocket your VA Loan Limit, so they want to know you can pay them back. 640 is required for these higher-rewarding VA Loans so you and your spouse can live in the home of your dreams.
VA Refinance Loan
We recommend speaking to Jimmy Vercellino and our team about minimum credit score requirements for refinancing your VA Loan. With cash-out refinance, streamline refinance, and other options, they can give you a specific score to reach.
How do credit scores affect my VA home loan?
You already know that debt determines your credit score since banks and private parties will assess numerous factors, like your payment history.
This figure assists home lenders by telling them how likely you are to default on the VA Loan, protecting them before they promise financial support. It will inform the home loan terms they establish for your family and could make or break your deal if they are picky.
For example, if you have a high score, this means that your history of repaying loans is high and you are less of a risk. A home lender will offer a better interest in this scenario because they can trust your financial management and your ability to repay.
However, they will ask for a higher VA Loan interest rate if your credit score is low since they either see poor or no money-handling history. Credit scores can affect the outcome of your home, but they equally affect the trust your lender will have in you.
Can I still get a loan with a bad credit score?
The short answer is yes. You and other servicemen and women can still receive a VA Home Loan with a score that some financial institutions consider below usual standards.
Again, private lenders and other VA parties can be flexible with credit score requirements as long as they can see other reasons from your financial history that they can trust you. The ones you should work with will consider things, such as if you have a low debt-to-income ratio, and not weigh your credit history as heavily against you.
If your score is just too low for any credit lender to accept, there are steps you can take to improve your credit score. We suggest paying off loans, canceling credit cards, or making steady payments for a couple of months.
Just because you do not qualify today does not mean you cannot qualify in the near future with some focus and dedication.
We Can Assist with Your Current Credit Score
If you know that your debt is in line and your credit score is high, you may be ready to begin your home buying journey. Or perhaps you know your score is low and need some assistance deciding what steps to take to improve your credit score as fast as possible.
Our team’s mission is to provide and assist you and other veterans and service members wiith all your VA Home Loan financing needs.
We take personal attention to all aspects of your financial history before making a loan offer and walk you through the process from start to finish. Assisting you with pre-qualification, closing costs, and more, you can trust us along the VA Loan Journey.
To speak with our veteran-run team and start your VA Loan Journey today through purchasing your first home, applying for a VA cash-out refinance, or anything in between, give us a call at (602).908.5849.