Getting Approved for a VA Home Loan with a Low Credit Score

Buying a home is an exciting milestone in life. However, having a low credit score can make qualifying for a mortgage difficult Fortunately, VA home loans have more flexible credit standards than conventional loans This makes it possible to get approved even with less-than-perfect credit.

In this comprehensive guide, we’ll cover everything you need to know about getting a VA mortgage with a low credit score. Read on to learn about VA credit requirements, how to check and improve your credit, reasons to boost your score, and tips for qualifying with bad credit.

VA Loan Credit Score Requirements

The Department of Veterans Affairs (VA) itself does not have a minimum credit score requirement for its home loan program. Rather individual lenders set their own credit standards for borrowers.

This contrasts with conventional loans, which typically require minimum scores of 620-680. It also differs from FHA loans backed by the Federal Housing Administration which generally call for minimum scores of 500-580.

The VA’s flexible policy allows more military members, veterans, and surviving spouses to achieve homeownership, even with credit challenges. Lenders can extend financing to these borrowers while relying on the VA’s guarantee.

So what credit scores do top VA lenders look for? Here are some examples:

• Veterans United – 620 minimum

• Navy Federal Credit Union – 620 minimum

• USAA – 620 minimum

• Fairway Independent Mortgage – 600 minimum

• Rocket Mortgage – 640 minimum

• DHI Mortgage – 620 minimum

• Movement Mortgage – 580 minimum

• Caliber Home Loans – 580 minimum

• Guaranteed Rate – 620 minimum

As you can see, many lenders accept scores as low as 580-620. This bodes well if your score falls below conventional requirements.

Checking Your Credit Score

Before applying for a VA loan, it’s wise to check your credit score. This gives you an idea of where you stand and how much work your score may need.

You can access your credit score from many sources, including:

• Free credit reports – Visit AnnualCreditReport.com to get your report from Equifax, Experian, and TransUnion once yearly.

• Credit monitoring sites – Websites like Credit Karma provide free credit scores and reports.

• Your bank or credit card – Many financial institutions offer free access to your credit score.

• Mortgage lenders – Talk to lenders to have them pull your credit and examine your scores.

When checking scores, understand the difference between a generic score from a credit site and the specialized mortgage scores lenders use. Generic scores give you a ballpark figure, while mortgage scores show the exact data lenders review.

Reasons to Improve Your Credit Score

While VA loans allow lower scores, improving your score still pays off. A higher credit score can benefit you in several ways:

• Better Loan Terms – Top scores of 720+ typically qualify you for the best interest rates and fees. Lower rates save money over the long run.

• Increased Buying Power – Solid credit grants access to larger VA loans with more flexible repayment options. This opens up more home possibilities.

• Faster Process – Strong credit can speed up approval, allowing you to lock in rates faster amid interest rate fluctuations.

• Peace of Mind – There’s less worry about credit roadblocks derailing your home loan application with a higher score.

Even gaining just 50-100 points can make a noticeable difference. While a VA loan provides more flexibility, aiming for the best possible score is wise.

How to Improve Your Credit Score

If your credit needs work, there are proven ways to build it up over time:

• Pay Bills on Time – Delinquent payments hurt your score, so pay all bills promptly. Set up autopay to avoid missed payments.

• Lower Balances – Keep credit card balances low compared to limits. Experts suggest less than 30%. High balances drag down scores.

• Avoid New Credit – Limit new credit inquiries by only applying for what you need. Too many hard inquiries in a short time can lower scores temporarily.

• Review Reports – Verify all information across your credit reports is correct. Dispute and remove errors that could unjustly dilute your score.

• Credit Counseling – Seek help from a credit expert to identify targeted ways to boost your score based on your credit profile. Their guidance can be invaluable.

With diligence and smart financial habits, you can improve your credit health over time. Be patient, as it takes consistency, but the effort will pay dividends.

Qualifying for a VA Loan with Bad Credit

A low credit score makes getting a conventional loan difficult, if not impossible. But a VA loan provides a path to ownership even with credit challenges.

Here are tips to boost your chances of securing a VA mortgage with bad credit:

• Shop Around – Compare quotes from multiple VA lenders to find the most favorable terms your score will allow.

• Ask About Exceptions – See if lenders will make exceptions to credit overlays for special circumstances. Some may be willing to work with you.

• Get a Cosigner – Adding a cosigner with strong credit can offset your score’s impact. This helps you meet credit requirements.

• Make a Down Payment – Though not required, larger down payments can persuade lenders to approve lower scores. Funds show commitment.

• Explain Derogatories – If you have late payments or collections, detail why they occurred. Lenders may be understanding of one-time life events.

While frustrating, don’t get discouraged if an initial lender denies your application. Remaining persistent and exploring multiple lenders could lead to the VA loan approval you need.

The Takeaway

The bottom line is that VA loans offer more flexibility for borrowers with low credit scores versus conventional mortgages. While the VA itself doesn’t dictate minimum scores, many lenders accept applicants with scores as low as 580-620.

Still, improving your credit score before applying for a VA loan can help you qualify for better terms and interest rates. Paying bills on time, limiting balances, avoiding unnecessary credit inquiries, and correcting errors are key ways to build your score over time.

And if you have bad credit, lenders may approve you by adding a cosigner, making a down payment, or explaining derogatory marks. With perseverance, homeownership is achievable for veterans, military members, and surviving spouses even with poor credit.