VA loan | What is the credit score? (2024)


This article outlines VA loan requirements for credit score, bankruptcy, short sale, judgment, and foreclosure.


What is the credit score for a VA loan?

The Department of Veterans Affairs (VA) has no minimum credit score requirement for VA loans. However, mortgage lenders offering VA loans set minimum credit scores to determine your ability to repay the loan.

Most VA lenders require a minimum credit score of at least 620. The exact requirement may be higher or lower, depending on the lender.

NewCastle Home Loans offers VA loans to military personnel and veterans, and our minimum credit score is 580.

You can get approved for an affordable VA loan when your credit score is 580 or higher.

This means you can use your VA benefits to buy a home with no down payment when your credit is less than perfect. Then, enjoy a low rate and monthly payment with no mortgage insurance. Check out our VA loan calculator to view current VA loan rates, payments, and costs.

  • VA credit score

VA loan | What is the credit score? (1)

Which credit score do lenders use for VA loans?

Mortgage lenders offering VA loans check all three credit bureaus, Equifax, Experian, and TransUnion, as part of the home loan process. The credit bureaus maintain records of your credit history, including information about credit accounts, loans, and payment history.

Lenders use this information to determine your ability to repay the loan. By reviewing your credit report from all three credit bureaus, lenders get a complete picture of your credit history and financial stability.

The credit bureaus give you a credit score. Your credit score predicts how likely you are to repay the loan. Based on your credit history. The scores range from 300 to 850. The higher your score, the better.

Lenders use the middle credit score to qualify you for a VA loan. The qualifying score is the lower middle score for the borrower and any co-borrowers for the loan.

If you apply by yourself and your credit scores are 600, 610, and 620, your qualifying credit score is the middle of 610.

Then, let's say you add your spouse to the loan application, her scores are 700, 710, and 720, and her qualifying score is 710.

In this case, the lower-of-the-middle credit score is 610, so the lender would use 610 to qualify you for the mortgage.

Remember that even if you meet the minimum credit score requirement for a VA loan, you may still need to demonstrate a solid credit history and financial stability to qualify. Talk to a VA loan expert at NewCastle Home Loans. Ask questions, get straight answers, and find out how to start on your VA home loan.

  • Does getting pre-approved hurt my credit?

VA loan | What is the credit score? (2)

How long before my credit score expires?

Your credit report and score are good for four months. After that, they expire, and the lender generates a new one. The lender uses the new report and score to make a loan decision and calculate the interest rate so that a lower score could affect your loan.

Maintain a good credit score and avoid making significant changes until you buy a house. Continue paying your bills on time and wait to make big purchases on credit.

Don't take out a loan to buy a car or open a credit card to purchase furniture for the new place. Lenders monitor your credit during the mortgage process. They know when you open new accounts, and they count the new debt when underwriting your loan application.

  • How long does a mortgage pre-approval last?

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Bankruptcy - How long is the waiting period for a VA loan?

The waiting period for a VA loan after bankruptcy varies depending on the type of bankruptcy, the circ*mstances leading up to it, and the lender. NewCastle Home Loans' waiting period for a VA loan after bankruptcy is as follows:

Chapter 7 bankruptcy: Two years from the date of discharge

Chapter 13 bankruptcy: One year from the date of discharge

Additionally, even if you meet the waiting period requirement, you may still need to demonstrate a solid credit history and financial stability to qualify for a VA loan. We may ask you for a letter of explanation and documentation of your bankruptcy, such as court records or bankruptcy discharge papers.

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Short sale - How long is the waiting period for a VA loan?

The waiting period for a VA loan after a short sale varies depending on the circ*mstances leading up to the short sale and your credit history.

If you use NewCastle Home Loans for your VA loan, you might not have a waiting period after a short sale - as long as you prove both of the following are true:

The short sale didn't affect your payment history on the property, and

The short sale resulted from a documented extenuating circ*mstance, such as a natural disaster or job loss.

Supporting documents like a letter of explanation and a Closing Disclosure from the short sale would prove the circ*mstances.

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Judgment - How long is the waiting period for a VA loan?

You can get a VA loan if you have a judgment on your credit report, but it may be more difficult. A judgment is a court ruling that results from a creditor suing a borrower and winning a lawsuit for an unpaid debt.

Judgments must be paid in full or need a repayment plan with at least 12 timely payments.

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Foreclosure - How long is the waiting period for a VA loan?

You can get a VA loan if you previously lost a home to foreclosure after a two-year waiting period with no additional requirements. However, you may be eligible after one year if both of the following are true:

You re-established good credit by opening at least two accounts, like cars or credit cards, and made payments on time for at least 12 months.

You can prove that the foreclosure was caused by circ*mstances beyond your control, such as unemployment, prolonged strikes, and medical bills not covered by insurance.

The lender will be able to review your credit history and financial situation and help you understand whether you can qualify for a VA loan after a foreclosure.

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Does a short sale or foreclosure affect a VA loan?

A previous short sale or foreclosure can impact your VA entitlement for a new VA loan. VA entitlement is the amount of money the VA is willing to guarantee on a VA loan.

Suppose you previously lost a home to a short sale or foreclosure, and the loan on the house was a VA-guaranteed loan. In that case, you may not have full entitlement available. Check your VA Certificate of Eligibility to ensure you have sufficient entitlement for a VA loan.

Or talk to an expert at NewCastle Home Loans to understand your options. We'll check your COE to determine your eligibility for a VA loan so you know what to expect when buying a home.

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Conclusion

Each VA-approved lender may have different requirements regarding credit scores, bankruptcy, short sales, judgments, and foreclosures.

Before applying for a VA loan, shop around and compare the credit score requirements of different lenders. This can help you find the lender offering the lowest rate and willing to work with your credit score.

Although you can buy a home with a 580 credit score, you'll need a higher credit score VA-backed cash-out refinance loan. For example, you need a 620 or higher score to refinance with NewCastle Home Loans and a 680 or higher score to borrow more than 90% and up to 100% of your home's appraised value.


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Visit our VA loan page for more information. Feel free to comment below.

VA loan | What is the credit score? (2024)

FAQs

VA loan | What is the credit score? ›

The U.S. Department of Veterans Affairs doesn't set a specific VA loan credit score requirement. Lenders, however, can set their own minimum requirements for a VA loan. Most require a score of at least 620, but some go as low as 500.

Does credit score matter with a VA loan? ›

VA lenders typically require a FICO score of at least 620. High loan amounts, such as those exceeding $1 million, may require a higher credit score.

Can I use my VA loan with bad credit? ›

If having a low credit score is a concern, a VA home loan could still make home ownership possible. VA does not have a minimum credit score; if one is imposed, it is by the private lender and you can always shop a different lender.

What credit score do I need to assume a VA loan? ›

Typically, lenders may want borrowers to have a minimum credit score of 620, unless there is a large down payment.

How many lines of credit do you need for a VA loan? ›

VA lenders typically require at least three trade lines verified to show timely payment. There are traditional and alternative credit types. Traditional trade lines are reported on a credit report identifying the creditor and the payment history.

Can I get a VA home loan with a 550 credit score? ›

The VA doesn't have a minimum credit score requirement. Instead, lenders can set their own requirements. At Rocket Mortgage, the minimum qualifying credit score is 580. Keep in mind, you can qualify for more favorable terms with a higher score.

Can I get a VA loan with a 500 credit score? ›

VA does not have a minimum credit score requirement. When a lender requires a minimum credit score it is generally a 620, that is called a lender overlay. An overlay is a lender's own underwriting guidelines above and beyond the VA guidelines.

What will cause VA loan to get disapproved? ›

Common Reasons VA Loans are Denied

Income outside the qualification range. High debt-to-income ratio. Inconsistent employment history. Other factors outside your control (e.g., a private mortgage lender choosing to reduce or end participation in the VA loan program)

Why would the VA not approve a loan? ›

One of the most common reasons VA loan denied is application errors. Failing to provide accurate and complete information on your loan application can raise red flags for underwriters. Double-check all the information you provide and make sure it matches your supporting documents.

Can you be denied for a VA loan? ›

VA lenders make money by approving loans, not denying them so they'll do what they can to get your approval. When they can't, they'll send what is called an Adverse Action notice. This is an official form and required by law to provide you with a written explanation of why your loan was not approved.

Are VA loans easier to get approved? ›

It's generally easier to receive a VA loan approval than a conventional mortgage because of the low credit score requirements for VA loans. The Department of Veterans Affairs itself doesn't require a minimum credit score.

What is the down payment for a VA loan? ›

Do VA Loans Require A Down Payment? VA loans are attractive because they usually don't require any down payment. This is an important benefit for home buyers who are short on cash. A down payment of 10% on a home costing $240,000 comes out to $24,000.

What is not required for a VA loan? ›

VA does not require a downpayment if the purchase price or cost is not more than the reasonable value of the property as determined by VA, but the lender may require one. If the purchase price or cost is more than the reasonable value, the difference must be paid in cash from your own resources.

How much house can I afford if I make $36,000 a year? ›

On a salary of $36,000 per year, you can afford a house priced around $100,000-$110,000 with a monthly payment of just over $1,000. This assumes you have no other debts you're paying off, but also that you haven't been able to save much for a down payment.

Who pays closing costs on a VA loan? ›

Who pays closing costs on a VA loan? The buyer is typically responsible for paying for things like the VA funding fee, loan origination fee and more. However, the seller might be able to contribute; they can pay closing costs up to 4 percent of the total home loan price.

Can I get a VA home loan with a 480 credit score? ›

Key Takeaways. No Minimum Credit Score – The VA loan program does not enforce a minimum credit score, focusing instead on the overall loan profile. Private Lenders' Role – Private lenders will likely have minimum credit score requirements, typically that will range between 580-620, which can affect loan terms.

Can I get a VA loan with a 580 credit score? ›

You can get approved for an affordable VA loan when your credit score is 580 or higher.

Do VA loans get denied? ›

VA loan denial isn't uncommon, but your odds are generally better with a VA loan. According to HMDA data, 12.93% of VA loan applications received a denial in 2022, compared to 17.29% of FHA loans and 17.9% of conventional loans. While not uncommon, many scenarios may be preventable.

What credit score do you need for Veterans first mortgage? ›

Veterans First currently requires a FICO score “around 600” for a VA loan. Does Veterans First do VA cash-out refinancing? Yes, you can apply for VA cash-out refinancing with Veterans First Mortgage. This involves borrowing cash from your home's equity.

Does income matter when using VA loan? ›

There is no set DTI requirement by the VA for home loan approval. However, borrowers with debt-to-income ratios greater than 41% may encounter a few more hurdles during the underwriting process. However, VA borrowers will need to meet VA residual income requirements, which are set based on your loan amount.

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