Trying to buy a new home can be a challenge for anyone, but especially for veterans. Trying to get used to civilian life again after service can be a challenge in itself, but this can be made harder when you’re trying to find a new home for yourself and your family.
Luckily there is the VA loan that can help you. This is a mortgage option offered to veterans by private lenders, which is then partially backed by the Department of Veteran Affairs. With a VA loan, you can secure a new home for yourself without having to pay a deposit.
However, there are many factors that you may need to consider when it comes to securing a VA loan, such as your credit score. This may of course lead you to wonder what is the lowest credit score for a VA loan?
What is the lowest credit score for a VA loan?
The great news is that the US Department of Veteran Affairs doesn’t require a credit score in order for you to qualify for a VA loan. The VA loan may require the lender to review the entire loan profile before agreeing to lend you the money you need.
All you personally need is to meet the requirements to be eligible for a VA loan. This includes meeting one or more of the following:
- Served 90 consecutive days of active service during wartime
- Served 181 days of active service during peacetime
- 6 years of service in the National Guard or Reserves
- Spouse of a service member who died in the line of duty or as a result of a service-related disability
However, while the US Department of Veteran Affairs doesn’t expect you to have a great credit score, some of the lenders you apply to probably will.
This is because they will want to ensure that you’re able to repay the money you borrow. You can get a VA loan to help you buy a home as a primary residence, or to help you refinance an existing loan.
The required credit score will vary from lender to lender. However, this typically tends to range between 580 up to 660. The better your credit score, the better rates and terms you will be able to get.
So it’s always worth taking a look into your credit score and how you can improve it. Lenders are also likely to consider your current income as well as your employment record.
Can I get a VA loan with a 500 credit score?
So now that we know the average minimum required credit score by lenders for a VA loan is between 580 and 660, you may already be feeling a little disheartened. If your credit score is below this, it may seem like it’s the end of the world.
After all, there is no requirement by the US Department of Veteran Affairs to have a credit score, so how can lenders be allowed to get away with changing the rules?
The simple answer is that they just want to make sure that you’re able to repay the loan over the length of the mortgage agreement. The good news is that just because you’ve got a slightly lower credit score than the lenders require, it’s not the end of the world.
You can still work on getting your credit score back up to where it should be so that you can still get that VA loan. If it means you have to keep renting for the time being, this might have to be a sacrifice you have to make.
It will be heartening to learn that you can still get a VA loan if you have a credit score of 500. You will need to get an approve/eligible rating from an automated underwriting system (AUS) so that you can get approved by the lender for a VA loan.
You can do this by ensuring that you’ve been able to repay all of your debt payments in a timely manner over the past 12 months. This will show the automated system that you’re able to make the regular payments needed to pay back your VA loan.
So even if you have prior late payments, charged-off accounts, or outstanding collections, you will need to have re-established your credit and have made these timely payments in the last 12 months.
Also it’s important that the 580 credit score isn’t a hard and fast rule for every lender. There will be several different credit lenders who have different requirements.
So there are indeed lenders who will be happy to give you a VA loan for a credit score that’s between 500 to 579, however, trying to find these lenders might take a bit of searching.
Can I get a VA loan with a 570 credit score?
Sometimes having a slightly lower credit score than the requirement can be even worse, as you know you’re not that far from where you need to be.
However, just as there are some lenders who can approve a VA loan for those with a credit score of 500, there are some who will be able to approve a VA loan for those with a credit score of 570.
Again, this might take you a bit of searching, and there’s no guarantee that they will 100% give you the VA loan, but it’s worth a shot.
Another thing you can do is to work on building up that credit score so that you and your family can get your own home.
Building up a great credit score will give your future lenders a picture of your borrowing habits, and can reassure them that you are a responsible person to lend money to. Ultimately, they just want to ensure that you can pay them back.
Financing a car loan can be a great way to build credit, or even applying for a credit card or two. As long as you’re able to pay the payments in a timely manner, this should help you improve your credit score. Especially if you do so regularly!
Remember, the credit score that certain lenders require will vary from company to company. Just because you’ve been rejected by one lender doesn’t mean you’ll be rejected by them all.
Does credit matter for a VA loan?
While there is no requirement for you to have a certain credit score to secure a VA loan, certain lenders may ask for this before they will grant you a loan. So unfortunately, credit can sometimes matter when it comes to securing a VA loan for your new home.
There’s no need to be disheartened just yet, though. The requirements will vary from lender to lender, and you can always build up your credit score until you’re more likely to get approved.
Most importantly you will need to have a regular, sustainable income so that you can repay your loan over time.
It may be worth taking a look at your credit report before you apply for a VA loan. This can show you whether you’re likely to be approved for the loan that you’re after. Also if you find an error in your credit report, you can raise a dispute with the credit agency to correct this.
It’s also worth noting that the better your credit score, the better rates and offers you’re likely to be eligible for. This will end up saving you thousands of dollars over the course of your mortgage agreement.
If you’re at the very start of acclimatizing back into civilian life, it will be well worth taking the time to improve your credit score so that you can secure a VA loan for yourself and your family over time.
So there you have it! You now know that while there is no minimum credit score requirement to be eligible for a VA loan, some lenders often require you to have a good credit score before they will agree to lend you the money for your home.
This may be frustrating if you just want to get your new home all set up, however, there may be ways you can work around it.
You should work on improving your credit score in general, as this can get you better rates for your mortgage. The typical credit score required by lenders tends to be around 580 to 660, but this will vary from lender to lender.