Va loans are the cheapest type of mortgage program available in 2017.
Because you don’t need a down payment and there’s no mortgage insurance.
But what credit score do you need to qualify for VA loans?
While the VA doesn’t have a minimum credit score requirement, each lender sets their own guidelines on credit scores. We will explain what scores you need and how you can improve your score so you can qualify for a VA mortgage.
What are VA Loans?
The Veterans Administration makes mortgage loans available to U.S. veterans who meet the VA Loan guidelines. They do not act as a lender, but does guarantee the loans, making it more desirable for lenders to make loans to veterans. VA loans are the cheapest type of mortgage program available. The two biggest benefits of VA loans is no down payment and PMI is not required.
Because VA requires no down payment and no minimum credit score, it offers many veterans with poor credit or limited resources the opportunity to become homeowners. While the VA credit score requirement is never an issue, other factors can make buying a home difficult for people with low FICO scores.
VA Loan Requirements for Credit Scores
The VA hasn’t set any minimum credit score requirements for VA mortgages. However, lenders do not have to follow the credit score requirements set by the VA. In fact, they typically require a credit score of 620 or higher. Yet, there are lenders who accept loan applicants with lower scores. The key to successfully purchasing a home with a lower credit score is to find the right lender who will work with you to help you accomplish your goal of owning your own home.
If you have a low credit score you may be able to qualify if you meet these conditions
- Have no, or limited debt in collections.
- No outstanding judgements against you.
- Steady income.
- No more than one late payment in the last 12 months
If your poor credit is due to an unusual set of circumstances and you have since resumed making timely bill payments, you may be considered if you can give a reasonable explanation for your low credit score, it is up to the lender’s discretion to decide whether to extend the loan or not.
VA Mortgage Benefits
- 100% financing
- No mortgage insurance
- Lower interest rates
- DTI ratio can be higher than other mortgages
- Low closing costs
- Easier to qualify for
VA Loan Eligibility Guidelines
If you’ve served in the active military for 6 months or in the reserves or National Guard for six years, you will likely qualify.
You will need to obtain a VA certificate of eligibility before applying. This proves to lenders that you qualify for a VA loan. However, lenders can usually get your certificate of eligibility for you after being approved.
Basic VA Service Requirements:
- 90 consecutive days of active service
- 181 days of active service during peacetime
- 6+ years in the Reserves or National Guard
- Active-duty Service
- National Guard and Reserves
Dishonorably discharged veterans are ineligible for a VA mortgage.
VA Loan Limits
In most parts of the country, veterans who qualify for military VA Loans can purchase a home worth up to $424,100 with no money down. However, with the 2017 VA Limits, high-cost counties such as Los Angeles and Denver have higher limits as high as $636,150. You can check VA loan limits in your county here.
VA Loan DTI Ratios
VA loan requirements do not state a maximum debt to income (DTI) ratio. However, lenders set there own maximum DTI requirements for these mortgages. Typically, lenders max DTI ratio fir VA 41%. However, 41% isn’t a hard limits there are exceptions in some cases. To qualify for a VA mortgage with a DTI over 41% you should have strong compensating factors, such as:
- Ability to make a downpayment
- High net worth
- Large amount of reserves
- Minimal increase in current housing payment
- Increased earning potential
- High credit score
There are many benefits to VA loans, relaxed credit score requirements are one of them. The Veterans Administration does not have a minimum required credit score for a VA loan. However, lenders set their limits on credit scores.
Many lenders will require a 620 credit score for VA, but some are able to go down to 580. VA home loans have NO down payment. You do not have to pay mortgage insurance with VA loans either. Good credit history and no late mortgage payments within the last 12 months. You also need a Certificate of Eligibility from the VA, which you can get through the U.S. Department of Veterans Affairs.
Qualifying VA Income
- Salary/W-2 Income
- Bonus or Overtime earnings
- Seasonal jobs
- Self-employed earnings
- LES stipulated military income
- Part-time earning
- Second Job
- Alimony or Child support
Non-Qualifying VA Income
- lottery income
- Unemployment income
- One time bonus
- One time income payments from job
- Income from non-occupying co-borrower
- inconsistent income history
- Unverified income
- Rental Income
VA Streamline Refinance
If you currently have a VA loan. You may be eligible to refinance your mortgage and get a lower interest rate. A VA streamline refinance is available to Veterans who have had their mortgage for at least 210 days. A streamline refinance is quick and easy. There is no credit check or income verification to qualify.
Finding the Right VA Lender
If you have never bought a home before or never bought using a VA loan, finding the right lender on your own can seem next to impossible. You need a reputable lender who knows how to overcome bad credit and work with the Veterans Administration to secure your home loan. A lender who is attentive to the needs of veterans wants to extend credit to as many veterans as possible, acknowledging that the lack of a specific credit score VA loan requires was chosen for to help veterans who have different challenges than others buying homes.