VA Loan Credit Requirements
Even though the VA loan is more forgiving than conventional mortgage programs, there are still credit requirements in place for a VA loan. Most banks require a minimum 620 FICO or credit score and 12 months mortgage history with no lates. If you are a first time home buyer you may be required to verify timely rental payments.
Here are some types of imperfections on a credit report that may affect the VA loan approval process:
Payment History Factor
Payment history is an important factor in getting approved for a VA loan. Your rental and mortgage payment history signify your ability to pay your housing payment and will better qualify you for a VA loan. If you lack credit history, provide explanations for any of the following:
- If you are a veteran who has been recently discharged and have not been able to establish credit
- Use cash instead of credit on a regular basis for bill paying and purchases
- Veteran has not used credit since reconciliation of bankruptcy and judgments
Bankruptcy does not immediately disqualify a veteran who is applying for a V A loan. Here at LowVARates we strongly suggest speaking directly with one of our approved VA lenders regardless of what you have been told regarding bankruptcy in the past. If you have had a bankruptcy discharged over 2 years previous to applying for a VA loan it may not be considered by some lenders. If the bankruptcy discharge was within 1-2 years of applying for a VA loan there are a couple things that are taken into consideration that may still help qualify a veteran:
- If you have obtained credit following the bankruptcy and made satisfactory timely payments
- If reasons for bankruptcy were above and beyond the control of the veteran-Loss of job, medical bills, divorce, loss of a business etc.
Foreclosure is still another issue that will be a deciding factor in qualifying a veteran for a VA loan. The same rules apply as did with bankruptcy, but if the foreclosure is on a VA loan that may change the amount of entitlement available to be used.
Plan ahead and improve credit
When applying for a VA loan, work in advance to reconcile issues on your credit report by paying collection accounts in full or setting up payment plans with judgments against you.