The benefits that veterans of the US Armed Forces enjoy are better today than ever before, but it would be impossible for these benefits to come anywhere close to rewarding these people for their sacrifice that they made willingly for their country.
If you have less than picture-perfect credit score and are wondering if you can qualify for a VA mortgage, hopefully, you find all of the inside information and answers you are looking for contained within this quick guide.
FHA Loans Vs. VA Loans: Quick Summary:
FHA loans are somewhat like VA loans in that the government provides guaranty against default by borrowers. FHA offers a full guarantee against mortgage loans default the Department Of Veteran Affairs only provides a partial guarantee against the nonpayment.
Another thing that sets the FHA loans apart from VA loan is the credit score requirements. Even though there are no clearly-stated minimum FICO credit score requirements for both the VA and FHA loans, the loan program provided by the VA tends to have a slightly stricter credit requirement than that of set by the FHA. In most cases, individuals with bad credit (those with credit scores under 580), who are not qualifying for VA loans, usually seek financing from the FHA.
The loan program offered by FHA is, however, requires the borrower to put down at least 3.5% of the mortgage loans. On the other hand, you don’t need to pay down payment for the VA loan program. The no-money-down payment is one key benefit of a VA loan aside from many other advantages you cannot find from other loan programs.
The VA (Veterans Administration) itself doesn’t act as the lender for these mortgages. The VA partially guarantees the mortgage– allowing veterans a much easier time to gain access to the loan while at the same time provides a guaranty that veterans never have to put down a down payment or pay PMI.
VA Funding Fee
Firstime home buyer veterans are not required to pay a down payment on their home loan; they are subject to a funding fee. A funding fee insures against bad loans and default and goes to the Department of Veteran Administration. Veterans who receive disability compensation or those who have a service-connected disability are exempt from paying the fee. The fee veterans need to pays vary depending on several factors such as their prior VA credit history, the down payment amount (if they pay a down payment). To learn more about VA funding fee you may want to visit this Veteran United page.
VA loans Closing Account
Even though veterans do not need to put down their money for a home loan, however, they are required to pay closing down cost. VA loan closing costs currently hover at 1-3% of the credit amount, and 3-5% for less expensive home.
VA Credit Requirements
There Is No Minimum Required Credit Score To Take Advantage Of A VA Home Loan
Unlike any other private lender out there, a big part of the VA Home Loans requirements is that they ISN’T any minimum credit score.
Yes, it’s possible to have a mortgage secured by the VA with not-so-perfect credit scores, the lenient requirement will help veterans gain access to mortgage loans reasonably easily.
Most Lenders WILL Want To See A Minimum Credit Score Of 620, Though…
While the VA isn’t going to mandate that you have any minimum credit score required to take advantage of the mortgage program they make available, most mortgage lenders that provide the financing themselves routinely have baselines that they expect from their clients and customers. That number regularly hovers at right around 620 for your FICO credit score.
VA lenders are going to factor a variety of things into their loan approval process as to whether or not they are comfortable offering you a mortgage, and if you have a credit score of 620 or less it doesn’t mean you are automatically going to be disqualified. As stated above the credit score required for a VA home loan is typically at least 620 points. However, some lenders are willing to extend loans to those having a 580 credit score or less.
Remember, since the VA is partially guaranteeing your mortgage there is little risk to an individual lender to offer you a mortgage with a credit score that is less than picture-perfect. That’s going to tip the scales in your favor.
At the same time, it is important to remember that lenders may or may not choose to forward with a veteran that has a lower credit score even if the VA is going to guarantee the mortgage loans. You might have to poke around a little bit to find a lender. The folks at West Mortgage VA Loan Offers or the Veterans United Lighthouse Program are typically willing extend credit to those with lower credit score.
Some VA lenders are upfront and honest about not caring whether or not your credit score is below 620.
Here is just a quick list of some of those lenders you might want to look into:
- Navy Federal Credit Union
- Veterans United Home Loans
- North American Savings Bank
- Quicken Loans
- New American Funding
- Guaranteed Rate
- Veterans First Mortgage
- Fairway Independent Mortgage Company
- Alterra Home Loans
VA Loan Requirements: Break Down
As we highlighted above, there is no minimum credit score for VA loans that you have to worry about when it comes to the VA in particular – what you are going to need to make sure that your documents are to take advantage of these kinds of loans moving forward.
There are other eligibility requirements that you will have to meet, including, but not limited to:
- 90 consecutive days of service on active duty
- 181 days of active duty service during peacetime
- 6 ½ years in the Reserves or National Guard
- Active Duty Service
- National Guard and Reserve service
You will have had to be discharged from the military with anything excluding a dishonorably discharged designation to qualify for these kinds of loans. A dishonorably discharged designation will disqualify you from these benefits.
As far as the documents needed for a VA Loan are concerned, you’ll need to make sure that you have:
- Your certificate of eligibility
- Form 28 – 1880
- Form DD – 214
- Form 28 – 8937 (if you have received Conducted Disability Benefits)
You are also going to need:
- The purchase contract
- A one-month accounting of pay stubs
- Two years of W-2 tax returns
- Contact information for your homeowners short
- And your government issued ID
As long as you have all of your bases covered with the documentation above, and have been discharged from the military with anything but a Dishonorable Discharge – you won’t have any trouble whatsoever getting a VA loan, even with a credit score of 580.
Wrapping Things Up
Plenty of people have found themselves in a VA loan credit score 580 situations before and haven’t been turned away, but are instead rewarded for their commitment to our nation, its ideals, and the long and time-honored tradition of joining the US military and representing our Armed Forces.
The VA may be dealing with bumps and bruises in specific departments and not live up to its expectations in certain areas. You still have the chance of getting a VA loan with a 580 credit score even though most lenders set 620 points as their baseline. If you’re not qualified for a VA loan due to your poor credit score you may want to opt foe a home loan instead.