Credit Score Guidelines
For those veterans worried about their past credit issues, VA loans easily represent the best choice out of all possible loan options. This is because VA loan requirements are much more lenient than other loan types in regards to credit history. They also offer a great deal more flexibility regarding difficult financial events in veterans’ past, like foreclosure or bankruptcy. Unlike most conventional and FHA loans, VA loans also don't require a minimum credit score in order to qualify.
Basic Information About VA Loan Credit Score Guidelines
- There is no disqualification for foreclosures and bankruptcies
- The typical VA loan credit score is around 620
- Lenders can be more lenient as they set their own criteria
If you’re a member of the Armed Forces or qualifying veteran and are thinking of buying a home, you need to understand the full range loan options out there in order to understand the benefits of a VA loan. The three most common loan types are conventional loans, FHA loans, and VA loans, and each has its own unique credit guidelines and qualifications. The more you know about each of them, the more informed your decision can be in choosing the best loan for your situation.
If you are a veteran concerned about past credit issues hurting your chances of getting a loan, VA loans easily represent your best loan option out of the three. Compared to FHA and conventional loans, VA loans are more lenient regarding credit history and past missteps like foreclosures and bankruptcy. Also, unlike conventional and FHA loans, VA loans will usually not require a minimum credit score to qualify.
It worth noting, however, that some VA lenders will apply their own minimum credit score, with the average VA FICO score currently sitting around 620.
Much of this flexibility among VA lenders is due to the fact that, with these loans, lenders are able to determine their own criteria. This means that veterans seeking VA loans might not qualify at one lender, only to be accepted by another.
Of course, this isn’t to say that the VA approves all loan applications. The VA looks for some red flags in veterans’ financial histories to determine if they’re a good fit for a loan or not. For instance, late payments, judgments, or collections in the last 12 months could result in a veteran’s loan application being denied. This is why, if you are a veteran planning on applying for a VA loan in the near future, it’s highly recommended that you make sure all payments that could show up on your credit history (Ex: credit card payments) are consistently on time in the 12 months leading up to your application.
If you're a veteran looking to use a VA loan for a streamline refinance, you need to know that these programs have changed over the last few years, due to shifts in the mortgage industry. Previously, borrowers of VA loans could simply refinance into a new VA loan, and no additional appraisal was needed. This has changed. Fortunately, VA loan borrowers can still refinance into a new loan at a lower interest rate and still count on far less paperwork than would be required for a FHA or conventional loan refinance.
Compared to other loan options, VA loans are an unbeatable opportunity for members and veterans of the Armed Forces, specifically those concerned with past credit issues.