Here at National VA loans we often get questions about how to get a VA loan with bad credit? Things happen in our lives that unfortunately can effect our financial situations and our credit. Less than perfect or bad credit can put a strain on many financial decisions. For example it can really be a struggle when it comes to borrowing money for a new car or new home. The good news is when it comes to the VA mortgage loan there is no minimum credit requirement. That’s right the VA handbook mentions nothing about a required credit score. That being said borrowers, must meet an adequate credit risk. So what does adequate credit risk mean? In a nutshell, it is a FICO score where lenders feel comfortable lending money. In a perfect world, VA lenders should have understanding and flexibility when issuing mortgage loans to hard-working people. After all, we are all just trying to provide for our families and provide the best possible life and environment possible. Unfortunately, the reality of the situation is that is not how things work in our world of ours.
VA Home Loan Credit Requirements
Since the housing crises of 2008 many things have changed to protect both the consumer and the lender. It is important to keep in mind that the VA does not lend the money but rather insure a percentage of the loan in case of default. This gives lenders more confidence in lending the money loosening up guidelines. Many mortgage lenders and banks have there own criteria they follow for mortgage loans. Most look for a minimum credit score of around 620. Anytime you borrow money you are at the discretion of the lending institution to determine if your qualifications meet there standards. If you can improve your credit it really helps when determining your borrowing power. You have the right to find out if your credit score falls short and if that is the case there is hope. Your credit can be fixed with a little time. There are credit repair agencies that will help you clean things up and get you on the right path to better credit.
The number two question that is quite frequently asked, is what if my spouse has bad credit? The only acceptable co-borrower on a loan is a spouse or another veteran. Another important question to have answered; is, that both parties on the mortgage have to meet both VA and lender requirements. See here for more VA Loan Requirement Guidelines.
An example of this, married couples pursuing a VA home loan, each obliged on the mortgage note. There may be a multitude of reasons why a husband or wife does not meet specifications. Not having enough income for the purchase of their home on his or her own. Sometimes, adding a second income of the spouse will do the job for the purchasing power. In our current state of the economy, lenders are looking for debt-to-income ratio and often wanting a score of 620 from both individuals involved.
The problem can be solved by different solutions. First of all, see if you can get pre-approved for the loan amount without your spouse’s income. This would be a simple solution but not all prospective borrowers will be that lucky. On the other hand, co-borrowers combating credit issues may just want to dive in headfirst and this could be the best route to take.
There are a number of different factors that contribute to lowering a credit score. Correcting issues means, increasing that credit score! In your credit report, there are always corrections that need to be made and they can be fixed quickly, while other corrections could take time. If you want your score increased it means discipline and with discipline, there is satisfaction in the end! Always, remember the saying, “hard work and discipline pay off.”
Not all situations are the same and in some cases, your credit score may not be the main determining factor. Although these cases are rare there are veterans that do get home loans with less than perfect credit. That being said the question should not be how to get VA loan with bad credit but rather how do I improve my credit to get a VA loan.
If you would like to learn more about your credit score and determine if you can get pre-approved for a VA home loan call 855-956-4040 to speak with a VA Loan Specialist.